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Paper cheques are costing us a fortune. And that is not an exaggeration. Even our government is feeling the pain. Recent news reported that approximately $1.4 billion was sitting in Canada’s Revenue Agency coffers thanks to uncashed cheques. And that’s a big problem. Lost cheques, changes in addresses and checks buried in bottom drawers can cost both the sender and the receiver in more ways than one.
Canadians still use nearly a billion cheques each year, costing companies millions.
So, what if you are one of thousands of Canadian businesses still accepting cheques? Let’s examine what it costs your business and how you can fix it.
Processing paper payments are a notoriously lengthy process. While there are several things to consider when it comes to paper-based payment processing, here we solely zero in on banks and the cheque hold periods. And when it comes to a financial institution, any federally regulated financial institution can hold back the funds for 4 to 8 days, depending on the amount of the cheque and how it was deposited. While it may not always be this long, generally speaking, in Canada, it is likely to take anywhere from 2 to 5 days before a business would be able to access those funds. This delay leads to a slew of challenges companies face regarding delayed access to funds.
Paper payment processing costs organizations hundreds of thousands of dollars in lost productivity. The manual and labour-intensive work surrounding issuing or receiving payments by cheque are causing a significant drain on organizational workforce hours. When one steps through the process task by task, it becomes apparent how time-consuming cheque processing can be.
Step 1) Cheque is either prepared manually or through a financial institution or accounting software.
Step 2) The cheque is then delivered to the recipient through the post.
Step 3) Once the cheque leaves the sender's hands, they pass all payment control to the receiver and lose all visibility into the payment when it is received, cashed, and processed.
Step 4) Once the cheque has been received, it is likely to incur further processing delays due to lack of visibility. Cheque amounts that do not match the exact invoice amount lead to confusion and create a further challenge.
Step 5) The cheque is finally ready to be processed. Now the payment can finally be reconciled. Oftentimes this is done manually, alternatively the payment information can be entered into the accounting software.
Paper payments play a big part in the lack of transaction visibility, complex AR/AP processes, and manual reconciliations. This time staff spend processing cheques is time they are not spending doing more productive tasks that help to grow and scale the business.
As illustrated in the infographic below, cheques cost organizations anywhere from $15-$25 in hard costs per cheque. In other words, if a business is currently processing a thousand cheques a month, it could take close to $15,000 off its bottom line. With costs like that, it makes a clear case why businesses should shift away from paper cheques and migrate over to digital payment processing.
Paper-based financial transactions aren’t just expensive; they also pose a significant challenge to a company’s cash flow. Slow payment processing and ineffective AR and AP processes can considerably increase Days Sales Outstanding (DSO) and negatively impact cash flow. Poor cash flow can cause massive headaches; in fact, 82% of failed small businesses reported cash flow problems as their leading cause of failure.
Cheques are one of the most common forms of financial fraud. They can easily fall victim to mail theft, counterfeits and falsification. Unfortunately, it is more complicated and takes more time to be notified when a cheque is fraudulent, making it unlikely to recoup any loss.
Worldwide we have seen a shift; more and more consumers are sourcing environmentally friendly alternatives, which means a faster move away from paper. Even in payments, there is a role to be played. A collaborative report released by Visa and the Cambridge Institute for Sustainability Leadership identified how the payments industry is contributing to the transition to a net-zero economy. An increasing demand, coupled with the advent of more advanced payment technology, makes cheques comparable to a cassette tape – obsolete.
Now is a great time to move away from the expensive and tedious processes around cheques.
Not only will an organization see a significant reduction in expenses and costs from the benefits outlined above, but it will also likely see a revenue increase. For instance, reports show businesses that offer customers multiple ways to pay could see a 30% increase in profits.
Payments are no longer just a business necessity; they are now used to gain that competitive edge. Digital payments do quite well what paper cheques could never do. They provide visibility into the transaction and unlock the data that accompanies it. With this profound insight into each and every transaction, financial reconciliations become a breeze and cashflow reporting can deliver real-time positioning.
Consumers and businesses alike want the convenience of easy and secure financial transactions, and the by-product of that is a better financial position.
Many companies have communicated that they would be open to moving away from cheques if they had confidence that a digital alternative would be secure, efficient and suit their needs.
With VoPay’s unified payment platform, businesses can access multi-rail payments, including EFT, PayLink, Visa Direct and e-Transfers.
All of VoPay’s payment transactions are secured through tokenization technology and include risk intelligence, AR/AP automation, advanced reporting, and bank account verification.
VoPay is fully compliant with bank security standards and regulatory compliance.
Contact us today to learn more about making the switch to digital.
