Making the Switch From Paper Cheques to Electronic Payment
Paper cheques’ days are numbered!
As anyone doing business in Europe will know, cheques are no longer used as a method of payment in most European countries. Rather, it is standard practice for companies to publish their bank details on invoices, so that payment can be made directly to their bank account.
Within North America, cheque usage is on the decline. We believe that the tipping point is fast approaching where cheques will become the exception, rather than the rule, in business-to-business (B2B) payments. A significant number of corporations are planning to migrate the majority of their B2B payments to electronic payments.
There are numerous advantages to using electronic payment methods such as electronic funds transfer (EFT) to pay your suppliers and employees:
Security and internal control is significantly strengthened, reducing chance of fraud and theft. EFT payment approvals utilize strong on-line banking security, instead of much weaker paper-based signature approvals
Paper cheque stock no longer needs to be stored and secured
Clerical work and errors are reduced through automated efficiency
Ability to manage and forecast cash flow is improved. Payments can be set up with various due dates, and post-dated for up to 35 days
Stale-dated cheques are no longer a possibility
Bank reconciliations are simplified, as there will be no outstanding cheques to account for
Cheque printing, mailing and handling costs are eliminated
Payment approval process is streamlined. Payments are ready for approval immediately upon entry into the EFT system. Payments can be approved from anywhere, at anytime, by authorized signing authorities
EFT is environmentally friendly. Paper & ink used in producing cheques and envelopes is eliminated, as is the carbon footprint resulting from the physical distribution of cheques.
There are also a number of benefits to vendors and employees of implementing EFT payables. These include:
Assurance of prompt payment directly to vendor’s bank account
Vendors have improved ability to manage and forecast their company’s cash flow
Time and cost of handling and depositing cheques is eliminated
Risk of lost, stolen or damaged cheques is eliminated
The process to convert to EFT payables is relatively straightforward. Begin by gathering written authorizations from your suppliers to pay them electronically. This information can be collected on a single page form and includes your supplier’s banking information, along with their agreement that payments will be made to the specified bank account. The supplier also agrees to notify you if they wish to change the account to which payment is to be made. These forms should be kept on file in the event of any dispute concerning where funds have been deposited.
Each bank has their own web portal and systems to enable their customers to process EFT transactions via the internet. Security tokens or USB keys, along with a user ID and password, are given to each person requiring access.
Multiple signing authorities can be easily accommodated, as each signing authority is given their own security token and access credentials. Before a payment transaction can be released for payment, all necessary approval authorities must first have signed on and approved the transaction. This is one reason why EFT is considered to be a far more secure method of payment than paper cheques.
Does your organization still pay its suppliers using paper cheques? If so, you may wish to consider joining the growing number of organizations that have converted their payment method from cheques to electronic payment, in the process realizing significant benefits.