Electronic payments, including payroll, benefit the environment, which helps every living thing. But, there are benefits you may not be aware of. Electronic payments are actually safer and produce tremendous savings for banks, businesses, and consumers.
Even though electronic payments are on the rise, 50% of businesses still use paper checks. Quite often, those who use paper are concerned about maintaining a paper trail and/or the security of electronic payments. These are valid concerns, BUT they are not addressed by clinging to paper check processing and paper records.
A look at just a few facts regarding electronic vs. paper payment processing will help you understand the benefits and possibly let go of the paper.
The Paper Trail Vs. Electronic Records
A paper document or file stored in a physical location is tangible and thus seems more secure. However, due to storage space constraints and the cost of printing, there is often no backup copy. These paper documents can intentionally or accidentally be tampered with or destroyed. With no backup available, tampering is difficult to detect and replacement is impossible.
Electronic data, stored on a secure server, is normally backed up on redundant servers. If one copy is lost or tampered with, a backup exists. Also, edits to electronic documents can be traced, taking the “trail” to a whole new level.
Electronic Processing Produces Tremendous Savings
Because of the events on September 11, 2001, Congress passed what is known as Check 21. The act authorized fully electronic clearance of checks in place of a physical check. This move increased the efficiency of check processing and reduced check float significantly.
The Research Department of The Federal Reserve Bank of Philadelphia summarized savings (excerpt below) in a research paper called “Getting Rid of Paper: Savings from Check 21 (pdf).”
By shifting to electronic collection and presentment, the Federal Reserve reduced its per item check processing costs by over 70%, reducing estimated overall payment system costs by $1.16 billion in 2010. In addition, payment collection times and associated float fell dramatically for collecting banks and payees [ …]
Paper Checks Become Electronic Payments
Most of the paper checks you write are processed as an electronic payment. Therefore, if you are clinging to paper simply to avoid electronic processing, you are simply wasting your money.
The Federal Reserve Bank of New York, explains the process and states:
Instead of transporting and sorting paper checks as was done in the past, financial institutions such as banks and credit unions and some businesses process the checks that they receive electronically.
Still Not Convinced?
In this post, we covered just the highlights on the savings and benefits of electronic payments, but there are more. Also, as each business is different, each will realize different savings and benefits. If you are still on the fence and would like to learn more, contact us for a free consultation. We will take a look at your specific business needs and help you determine how switching your payroll to an electronic system can save you time and money.
In the near future, we will post talking points to help your employees understand and trust electronic payments. Be sure to check back often or send us any questions you may have.