Checks are quickly becoming a payment method from the past, and for a good reason: checks are insecure, time-consuming, and costly to produce.
Construction is one of the industries steadfastly holding on to checks, though. If letting go of this paper-based paper format gives you anxiety, have no fear. This article will outline some of the best alternatives to checks for construction companies in America to make your accounting easier and your payments faster and cheaper.
First, here's a little more on why checks are on their way out.
How Much Checks Really Cost
Many companies hold on to checks because they believe they're a cheaper alternative to using credit cards or other forms of payment. While checks initially appear to be a low-cost payment method, you see a completely different story when you look below the surface at some hidden costs they create.
Nothing about checks is automatic. Your office staff spends precious time filling out, chasing down signatures, writing envelopes, and finally mailing a check.
When was the last time you added up the costs of printing checks? It's far from cheap – each of those little slips of paper can run up to $70 by paying for paper, printer ink, and your staff's time to get the job done.
Although a check is written and sent to cover a payment, the money is not gone. But your accounts should reflect that the payment has been sent out. Your accounting staff has to spend time adjusting accounts manually to deduct the paid amount and avoid confusion that could get the check returned NSF, which would also incur a fee.
All this before the check even makes it to your supplier, who has to deposit it and wait the bank's standard holding period before the money is available. The whole process reeks of inefficiency.
Other Downsides of Checks
Besides being costly, checks are inconvenient and subject to logistical delays, including mailing issues or administrative missteps that could result in the check being lost entirely. In the end, the recipient could be waiting days or weeks to receive their payments. Checks have also been subject to rampant fraud since their inception. Thankfully, there are better ways of doing business in the 21st century.
Now for the good stuff – check alternatives that can make payments faster, cheaper, and easier for both sender and recipient.
Like checks, ACH transfers have been around for a long time, and they offer many advantages over paper payments. They can be completed at a distance (no in-person signing required and delivery is much faster than mail), and they're far more secure than checks, which suffer one of the worst track records for fraud of any payment method.
That's why businesses use ACH very frequently these days. For instance, many folks receive payroll through ACH transfers and use ACH to pay their phone and internet bills through automatic withdrawal.
ACH transfers suffer their own downfalls, though. First and foremost is the setup required to send the first ACH transfer. You'll need all the same information as it takes to wire money, including the bank name, address, account number, SWIFT code, and routing number, which is why ACH is better suited to recurring payments than one-offs.
Wire transfers are often confused with ACH transfers because both involve the movement of funds directly from one account to the other. However, the two payment methods are handled differently by the financial institutions that send and receive them and offer different experiences to the sender and receiver.
Wire transfers can send payments from one person to another (that is, they can push money), but they can't debit funds from someone else's account (they can't pull money). Unlike ACH payments, which are gathered and completed in multiple batched daily transactions, wire transfers happen instantaneously. Specialized as they are, wire transfers cost an average of $26 per transfer.
These characteristics are why wire transfers are often used to send funds for a large purchase, like a down payment on a house, and why they're not often used for repeat day-to-day transactions.
Online Payment Platforms
Finally, one payment method solves many of the above pitfalls: online payment platforms like Truss. Using Truss, you can make payments instantly between bank accounts with bank-level security, without all the fussy setup and high fees of wire transfers.
Truss makes sending high dollar-value business payments simple. Bill payments can be automated straight from your email inbox and categorized for better organization. After your vendors approve the payment, the bill is automatically marked as paid in your accounting software.
Receivables just got easier, too. Truss will help you generate invoices with unique payment links – or create a payment link you can pop into an email for quick, seamless money transfers. This new era can smooth many wrinkles out of business payments and the associated accounting processes, taking business payments to a new level.
Why Payment Methods Matter
In the grand scheme of things, it may seem like your payment method makes little difference. But construction is an industry that turns on the effectiveness of its cash flow – a business that does a poor job of managing money in and money out will quickly find it has trouble keeping projects running.
The average payment time in US construction businesses is 83 days. If a subcontracting company is waiting nearly three months for payment, it may have trouble buying materials for a job, and the job may become delayed, which can spell disaster for many people across the industry. Speeding up the movement of money between companies can mean the difference between success and failure for many separate individuals across the construction industry.
Payment methods matter in construction. Facilitating fast, seamless transactions can improve business operations for both sender and receiver, which is why now is the time to find an alternative to checks for your American construction business.