Despite many technological advances in payment solutions, 50% of businesses still use paper checks today. That’s not terribly surprising, since checks are a payment solution that’s been used for over 250 years.
However, paper checks have plenty of downsides that can wreak havoc on your business. They’re costly, create administrative burdens, and have harmful side-effects on your employees, clients – and the environment.
Here are five reasons why you need to eliminate paper checks in your business – and one affordable alternative to consider instead.
1. Reduce administrative headaches and fees
You have enough to do each day. How much time would you get back if you could avoid having to:
- Re-issue paper checks that get lost or damaged in the mail
- Manually create checks for off-cycle payrolls or ad hoc payouts to employees, contractors, or clients
- Chase down recipients that haven’t yet cashed their checks, so you can properly close the books
- Deal with checks that bounce
Furthermore, issuing paper checks is actually a costly and time-consuming endeavor. According to Bank of America, it costs $4 to $20 to process a single business check, a cost that can add up as businesses issue a lot of checks.
2. Eliminate check fraud
The American Bankers Association reports that approximately 60% of fraud incidents are check-related. Counterfeit checks or forged signatures are the leading types of check fraud. Limited controls on paper checks make the risk of fraud high.
Duane Broom, owner of the Orlando Protection Group (OPG) moved from paper checks to Payout cards explained, “choosing [a payout card] was the best decision I could make for my business. I made this decision because I got hit by check fraud. Besides losing a big amount of money, my company was put at risk. Ever since OPG made the transition by paying out all employees through branded payout cards.” No more check fraud.
3. Protect your employees and clients from predatory check cashing fees
Financial stress is a top reason employees leave their job. More than 40 percent of Americans admit financial stress makes it difficult for them to concentrate at work.
Paying workers by paper check weekly or bi-weekly compounds the stress – workers want the ability to get paid quickly and electronically as to avoid the expense of cashing a paper check (sometimes as much as 2-10% in fees). Plus, having go somewhere to cash a check is inconvenient and can costs employees both time and money.
4. Pay faster
This has benefits for both you and your recipients.
If you replace paper checks with a solution like a payout card or wire transfer, you can eliminate the time it takes to move money from your account to that of your recipient. When checks are outstanding, it is difficult to reconcile books and ensure proper funds are in your account before you issue the next payment.
Your recipients like to get paid faster, too. Instant-access bonuses, earned wage access (also called early pay), and real-time stipend or expense reimbursement payouts motivate employees. These tools become a differentiator for your company to attract, engage, and retain the workforce you need.
5. Help the environment
Each year, 15 billion trees are cut down. Millions of these trees are used for paper checks, that are often thrown away after 90 days. Furthermore, issuing checks leads to even more waste in envelopes and bank slips that are often thrown away often in just minutes after use.
A better solution to paper checks
Now that you’re familiar with the downsides of paper checks, you might be wondering: Is there a better solution out there?
A modern alternative to paper checks is payout cards – reloadable debit cards you can issue to your employees and clients. They can even be custom branded for your company.
Curious if payout cards might work for your business? Take this free assessment to understand whether they might be a relevant solution for you!
