Back in 2005, new entrepreneur Eric Barton was frustrated. He’d just launched FastEasySuccess, Hazel Green, Wisc.–based marketing firm, and was getting bogged down with paper checks.
“Back then I was writing up to 20 checks a week,” he said. “I was also receiving them from clients and began to see a lot of hassles associated with them such as waiting for payments to clear. I knew there had to be a better way for me to get paid and save on paperwork and accounting headaches.”
After some research, he found an online invoicing solution that secures payment through email and processes within two to five days—eliminating the issues he was experiencing with paper checks.
Although some web-based payment systems charge a processing fee to merchants, Barton said it is worth it.
“It is only a couple dollars every hundred and now I only need to write one or two checks per month, tops,” he said.
While using a web-based payment system may work for Barton, other small businesses are relying on credit cards more and more.
“I make more than 75 percent of my business payments using my debit card,” said Wray Rives, owner of the Coppell, Texas-based Wray Rives CPA. “Back in 1993 when I started my firm, I had a bookkeeper that did accounting for me. We generated volumes of paper, including paper checks.”
Rives operated on the old school system until a few years ago when he had an epiphany.
“It dawned on me that I had been making electronic payments in my personal life for years,” he said. “I finally asked myself, ‘Why am I not doing this for my business?’ Right then, I opened up a new banking account and now, am to the point that if I have an internet connection and a laptop, I can run my business from anywhere.”
Small businesses also might want to look into online payroll services, said Rives.
“Get an online payroll service that offers direct deposit and/or debit card payments for your employees,” he said. “Look for a service that also makes your payroll tax payments electronically.”
According to Scott Pezza, CDSP, senior research associate for Boston-based Aberdeen Group, an upcoming study authored the firm that polled 318 companies, reveals many companies are eliminating paper checks.
“We are seeing a move away from paper checks,” he said. “Just under 60 percent of our survey respondents noted a decrease in using paper checks within the last 12 months.”
Why are so many small businesses phasing out paper checks?
“It all comes down to efficiency gains and direct cost savings,” Pezza said. “We found that on average, a paper check transaction—meaning payment after invoice approval—costs $7.71, whereas automatic payments can cost a business around $3.41.”
In addition to cost savings, Barbara C. Kantor, CEO and founder of Vedante (vedante.com), a Boulder, Colo.-based clothing company, no longer uses paper checks as a dedication to the environment.
“We are committed to sustainability,” she said. “I don’t want to waste paper. Any business that is truly committed to sustainability should look into electronic payments.”
Katie Morell is a freelance writer based in Chicago, specializing in small business concerns.