According to this benchmarking survey of the Association for Financial Professionals, the median value for best estimated cost of issuing a check is $3.00. However, this does not factor in the time employees spend writing, mailing, collecting and reconciling the check (see this article in the WSJ). Furthermore, this doesn’t include the time and costs for the security around checks, like “Positive Pay” or other means to avoid check fraud. Please see our blog post on Internal Fraud about the risks in conjunction with manual checks.

 

Depending on the number of checks being issued per day, this may amount to a significant sum. Perhaps more importantly, the opportunity costs when the CFO or Treasurer have to sign (and review) each check manually will become increasingly high.

 

In addition, it costs your vendor time and money to process the paper check they receive from you, and it takes longer than electronic payment methods to receive the funds. JP Morgan estimates the average time to receive a check is 7 days. If your vendor isn’t using an expensive and sophisticated lockbox system, they have to enter the remittance information manually into their accounting system.

 

We have seen many vendors willing to agree on better pricing if ACH payments are agreed upon between vendor and customer. Here is an opportunity for your Accounts Payable Team to provide your Purchasing Department with arguments for reducing prices for goods and services your company procures.

 

The aforementioned costs do not even include the costs for Check Fraud and Fraud Prevention.

 

77% of organizations affected by payments fraud report that checks were targeted, see this report initiated by the NCAM. While the amounts vary, the losses of check fraud are estimated by the American Bankers Organisation at around $610M only in 2014. Countermeasures like “Positive Pay”, daily account reconciliation or segregation of accounts do cost time and money as well.

 

If you can transfer funds via ACH at a reasonable price and with the ability to share remittance information, this will not only reduce cost, fraud and risk, but also decrease time spent by your vendors.

 

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