The pandemic has shed light on a few areas in people’s lives where inefficiencies are glaring. One that jumps out is payments, specifically cash and paper cheques versus digital payments.
During the height of the pandemic, many businesses were no longer accepting cash. Moreover, it was becoming increasingly difficult to send and receive cheques because COVID-19 was originally thought to spread on surfaces—nobody wanted to physically touch cash or cheques.
Cheques are one of the oldest methods of payment in the modern era, and although their use among consumers has declined significantly, businesses are another story. While they are less common in other parts of the world, North Americans often use cheques for business expenses regularly. Canadians still use close to a billion cheques each year, which seems outlandish.
What that meant for businesses that heavily rely on paper-based financial transactions, is that they were forced to go digital.
So, what if you are one of the thousands of Canadian businesses that still accept cheques? Let’s take a deeper look at what that is costing your business and explore alternative solutions:
The Hidden Costs of Paper Cheques for Canadian Businesses
- Slow processing: Federally regulated banks can place six different types of hold on a cheque and keep it for 4 to 8 days. Compounded by the fact that cheques rely on mail service, an already slow service becomes unbearable. When you add the pandemic into the equation, this process almost comes to a standstill. Plus, cheques put pressure on a business’ accounting team because delays make it hard to balance accounts properly.
- Time: The most dangerous hidden cost of a cheque is the loss of time. Consider: A cheque must be prepared either manually or through accounting software. Then, it must be mailed or delivered to the recipient. Finally, the cheque must be reconciled in the accounting software. If a cheque takes a few days or even several months to cash, it will significantly impact the business’s bottom line. Furthermore, the time staff spends processing cheques is time they are not spending doing more productive tasks to grow the business.
- Cost: As noted in the infographic below, cheques can cost anywhere between $15-$25, when you accumulate the cost of administration, handling and printing. And that doesn’t take into account the time your finance team spends writing, mailing, collecting and reconciling the cheque. With costs like that, it’s clear why businesses have been shifting away from paper cheques in favour of digital payments, enabling business owners to put those funds back into their business.
- Poor Cash Flow: Paper-based financial transactions aren’t just expensive, it also slows your receivables down, which can increase your Days Sales Outstanding (DSO) and negatively impact your cash flow. In fact, poor cash flow management is the cause of small business failures 82% of the time.
- Cheque Fraud: Paper cheques can easily fall victim to mail theft, counterfeits and falsification. Unfortunately, it is more difficult and takes more time to be notified when a cheque is fraudulent, making it unlikely to recoup any loss. Cheques represent one of the most prevalent forms of financial fraud.
- Environmental Concerns: Globally, there is a massive shift towards a paperless economy. People are demanding environmentally friendly alternatives. This increasing demand, coupled with the advent of more advanced payment technology, has made cheques comparable to a cassette tape – obsolete and outdated.
More Payment Choices Lead to More Revenue
So, if a business decides to shift away from cheques, will it pay off? Yes. The key is to do it now and ensure that clients are knowledgeable and comfortable with the new platform or system. And let’s face it: The future is digital, so continued reliance on paper cheques as a primary payment method may leave businesses behind the curve while simultaneously increasing their carbon footprint.
Many businesses have communicated that they would be open to moving away from cheques if they had confidence that a digital alternative would be sufficient for their needs while maintaining security and increasing efficiency.
For business owners, the convenience of requesting, sending and receiving money instantly across Canada is a key component of maintaining a strong cash flow and running a successful business. All digital payment solutions are secure and sitting at bank-level security grade, plus electronic payment systems like VoPay offer you additional ways of securing your payments such as tokenization, encryption, SSL, etc. Furthermore, the customer’s journey is a seamless transaction, with no cumbersome handling of cheques required—no holds, no physical handling and no administration.
Businesses that offer customers multiple ways to pay can increase their revenue by as much as 30%. So, this could be a great opportunity to move away from expensive, tedious cheques and have your business stand out with digital payments.
Faster, Safer and More Efficient Digital Payments are Here to Stay
Here are three alternatives payment methods for businesses to consider:
EFT – Electronic funds transfers are a very safe and cost-effective way to move money between bank accounts across Canada. While electronic transfers may take a bit longer than real-time payments, they provide higher funding limits for businesses as well as automation options for recurring payments. For example, monthly loan repayments. VoPay offers same-day EFT payment solutions in Canada and the US, along with account verification technology.
e-Transfer: Making digital payment waves for businesses in 2021 is Interac e-Transfer, an account-to-account money-movement service that’s already popular with consumers. The service allows organizations to send secure payments instantly to multiple recipients without requiring their banking information. Available 24 hours, 7 days a week. This should be a no-brainer for most businesses. It is contactless, efficient and secure.
Our most recent article on Why Thousands of Business Owners are Choosing E-Transfer Every Day explores these benefits further.
Visa Direct – Visa Direct enables safe, convenient and real-time push payments for Visa cardholders across Canada. Visa Direct is a low-cost alternative for cheques and credit cards, with half the administrative work and paid in real-time. You not only save on cost but also on resource and management time so your team can focus on what matters most.
The evidence is in, the jury has deliberated and the outcome seems clear – the future is digital for payments. The pandemic pushed this narrative faster than many businesses had expected, but that doesn’t change the current situation.
Due to environmental concerns, cost, time and security reasons customers and business owners alike need a better solution for their payments. That better solution is a “digital-first” focus.
Contact us today to learn more about making the switch to digital.