When you hear the term “direct deposit,” you may think about payroll but that is not the only way businesses can use this time and money-saving service.
What about the checks you write for expense reimbursements or commissions? If you operate a corporation, how about depositing the dividend checks of shareholders into the bank accounts of their choice?
Today, it’s easy to offer this service and help your company become more efficient at the same time. Consider these benefits of direct deposit for many types of payments:
Check stock. Since direct deposit eliminates the need to write some checks, your company prints fewer checks. One survey of businesses by the Association for Financial Professionals pegged the median cost of issuing a check at $3, compared with under 30 cents for an electronic transaction. You save money, storage space and time.
Check printing hardware. Since your check printing equipment and automated signature machines are subject to less wear and tear, they’re likely to be repaired less often. You may also find that you don’t need some or all of this equipment anymore.
Security and facility space. Many companies keep check stock and the automated signature machines in a vault of some kind to ensure security. You may not need to worry about this any longer. The security and control risks are gone and this space can be used for other operations.
Reissuing lost or stolen checks. How often do you issue stop payments on lost payroll checks? How much time does it take to deal with the employee and reissue the check? This headache goes away when you use direct deposit.
Bank charges. Fees and service charges can be reduced by as much as 75% because paper checks are expensive to process. Check fraud represents billions of dollars in losses each year and check processing requires a high level of staff support. Because costs are much lower for direct deposit than for paper checks, banks charge lower fees for these automated services.
Errors. How many hands have to touch a paycheck for it to be processed? Because direct deposit requires less handling than check payments, mistakes are reduced.
Account reconciliation. Because direct deposits are issued electronically on the date you request and cleared on the settlement date you select, account reconciliation is a much simpler process. Instead of individual check entries to reconcile, you will have one entry for all of the checks.
Cash flow management. Your cash managers have complete control. They know exactly when they need to have funds available and when funds are used.
Fraud. One survey showed that over a two-year period, 60% of corporate respondents experienced check fraud in the form of counterfeited checks, stolen checks and signature plates, altered amounts, and forged signatures. Direct deposit eliminates fraud.
Payroll administration costs. Electronic deposits eliminate many manual check processes. Employees can be assigned to activities that are more productive and you may be able to reduce payroll costs.
Increased productivity. Direct deposit eliminates the time employees take to deposit their paychecks — often during work hours. Companies using direct deposit report productivity gains ranging from 8.5 to 24 hours per employee per year.