The True Cost of Paper Checks vs ACH
Estimates suggest your business could be spending $24,540 annually just processing paper checks.
Since 1865, checks have played a pivotal role in the United States payment system. Checks were the only non-cash option for the first 100 years of its existence, until credit cards were introduced in the 1950s. As payment technology has evolved, the need for checks has diminished — but the costs have remained. Here are three ways paper checks could be costing your business more than you realize:
Money – According to NACHA, it costs on average $1.22 to process a paper check, which accounts for manpower and various other costs. Overall, checks are “a burden on the economy,” according to Vipal Monga, a reporter for The Wall Street Journal. Bill.com estimates that paper checks cost business up to $24,540 annually in terms of employee labor, materials, bank fees and postage.
Paper checks pose costs for customers, too. If your business receives mailed checks for recurring payments, your customer is paying for the check, postage and envelope every time a payment is due.
- Time – Checks eat up everyone's time. Customers spend time writing them at checkout or prepping them to be mailed out. Businesses spend time waiting for checks in the mail or chasing down customers to collect check payments, driving to the bank to make deposits, and then verifying the deposits at a later date. If a check bounces, you must track down the customer to resolve the issue, and guess what? That’s more valuable time taken away from your day. In total, Bill.com estimates that approximately $1,280 in labor costs are associated with paper checks. Checks also add more volume to post offices’ workflows, incurring costs for the government and taking up time for its employees.
- The Environment – Checks impact the environment just like paper receipts do. The production of checks requires trees, water and gas, and it expels greenhouse gases. Ultimately, once a check is processed, it is destroyed within 90 days of acceptance, simply contributing more waste to landfills.
ACH: An Alternative to Paper Checks
A cheaper and environmentally friendly option is ACH processing, which can cost as little as $0.25 per check to process. In contrast to Bill.com's $24,540 estimate for paper checks, ACH checks cost just $1,680 annually — a 93 percent reduction in costs. Though the growth of ACH was initially slow, 19 billion ACH transactions are now processed annually. Why? Because beyond its low cost and green technology, it’s convenient.
For one, processing ACH payments through Virtual Terminals allows for faster deposit verification. Most providers that do ACH check processing offer next-day funding, which means you’ll get your money deposited into your account within a day. That’s much quicker than the typical seven to 10 days it takes for paper checks to clear.
ACH processing sends quicker alerts of rejects or NOCs, so there’s less time between the initial payment and notifications of delays. You also gain the ability to collect hands-off recurring payments. Instead of collecting mailed-in checks, you can set up a custom schedule to automatically bill your customers’ accounts. With the ability to store accounts on file, you can also re-charge your customers for one-time transactions.
Instead of using duplicate checks to create a paper trail of transactions, ACH payments allow you to produce a receipt that is stored in the cloud for quick reference. The receipt can be emailed to the customer for her records, and a signature can be captured in-person or remotely to ensure that the transaction has been authorized.
Instead of using duplicate checks to create a paper trail of the transactions, ACH payments allow you to produce a receipt that is stored in the cloud for quick reference. The receipt can be emailed to the customer for their records, and a signature can be captured in-person or remotely to ensure that the transaction has been authorized.