The paper cheque has been a mainstay of B2B commerce for centuries — according to historians, cheques started going mainstream in 1500s Holland. Now, they’re a part of nearly every transaction a business makes, from paying employees to purchasing goods to accepting money from suppliers and more.
The world, however, is rapidly moving away from paper-based and manual processes toward digitization, including digital payments. It’s gotten to the point where those who are still using cheques may actually be hurting their business. Who has the time to write cheque after cheque and then put them in mail? No one wants to deal with bad payments, complicated currency conversations, cash flow issues that arise from delayed deposits and more. Here are five ways that cheques could be hindering your business.
1. You could be losing business
Cheque usage has declined over the last few years, dropping by 7.2% per year between 2015 and 2018 in the U.S., according to the Federal Reserve. The Philadelphia Federal Reserve has gone so far as estimating that cheques could become obsolete by 2026. That means that fewer and fewer vendors will accept cheques in the years ahead. Contractors may choose to only work with firms that pay digitally — cheques, which can get lost in the mail and may require a trip to the bank for a deposit, aren’t ideal for them either — while others along the supply chain may stop processing paper. You don’t want to lose out on business because you're still relying on cheques or have to scramble to digitize at the last minute.
2. You’re taking on unnecessary expenses
Compared to digital, physical cheques are expensive. According to Bank of America, it’s estimated that a paper payment costs between $4 and $20, when you factor in the price of the cheque and the cost of shipping. Everything from the cheque itself to the envelope to the stamp to the gas it takes for someone to mail that payment adds up. A digital payment can cost anywhere from zero dollars to a few bucks depending on the bank you use and the payment method, but no matter how you look at it, it’s cheaper to send something virtually than in the mail.
3. You’re using time better spent on other tasks
Signing and mailing cheques takes time. Sure, adding your John Hancock onto one cheque may only take a few seconds, but think of how many of them you sign over the course of a year. It takes even longer to put each cheque into an envelope and then send them off. Depositing cheques — whether that’s you doing it or someone who works for you — is just as time consuming. All of that time could be better spent on other tasks, whether it’s business strategy or other areas that don’t get enough attention.
4. You’re not managing your cash flow as well as you could be
Given that we can send messages across the world instantly, or that nearly any piece of data can be called up with a few keystrokes, it’s amazing to think that it can still take six months for someone to cash a cheque. While you might think that a vendor would deposit a payment right away, it can still take a week or two for that cheque to arrive, and you can’t be sure as to when they’ll get around to putting it in their bank account. It’s hard to manage cash flows when you aren’t certain when those funds will leave your coffers.
5. You’re losing out on important data
Data is becoming more and more important to companies, with analytics generating all kinds of business and customer insights. Paper cheques, though, will never yield usable information. You may know when a cheque is cashed, and to whom you sent it, but that’s about it. If your systems were digital you could connect payments with other kinds of customer information, you could have more insight into what’s been sent and received, as well as insight into what’s still owed, currency conversions and more.
So how can you go more digital? It requires more cloud-based ERP systems, ensuring you’re using all of your bank’s digital payment tools, pressing your financial institutions to go more digital and working with FinTech companies to help facilitate virtual payments. Visit our corporate users page to learn more about how FISPAN can help your business.
Read our whitepaper to find out more about what you can do to go digital.