While checks aren’t nearly as common as they used to be (from a consumer perspective, that is), they’re still widely used in the business world (particularly among small businesses).
Some estimates place the number of checks written each year at over 15 billion. So, checks are obviously not dead, and they are actually quite useful from a business standpoint.
It’s true that checks can be costly (when compared to their electronic counterparts), with some estimates placing the cost per check at anywhere from $5 to $20 (this includes the cost of the actual check, the cost of postage, shipping, etc.).
However, there are three main benefits to using checks (which are as follows):
- Checks easily transfer funds from one business entity to another.
- Checks allow for business data/related documents to travel with them (as opposed to some digital payment methods).
- Checks enable strong workflows.
These three reasons are why checks are still popular in the business world. Digital payments, for all of their convenience, simply don’t cover all of the aforementioned bases. They might cover one, or even two, but not all three (not yet, at least).
In order for a payment method to be able to compete with the traditional check, it needs to be able to do everything a check can do (and at the moment, digital payment methods simply cannot compete).
The Traditional Payment Method of Small Businesses
When you’re dealing with large corporations who have the capital and manpower to develop custom payment integrations between vendors, clients, etc., the paper check obviously falls to the backburner.
However, when you’re dealing with small businesses who need a payment method that comes with all of the benefits we listed in the above section, the check is very hard to beat.
Uncommon Benefits of Using Checks
One of the main differences in today’s world versus the past is that buying and receiving checks is no longer something that takes a lot of time (or effort).
Thanks to sites like checksnextday.com, you can buy checks online with overnight shipping and have them delivered the next business day.
Much more convenient than going to the bank and placing an order, and then having to wait a few weeks for the checks to actually arrive!
Another one of the more unknown benefits of using checks is that there is a much higher level of security behind them (compared to checks of the past). A lot of this added security is due to an increase in the overall security structure of financial institutions. Read more about financial security here.
One last benefit that you might be surprised to learn, is that checks are usually less expensive than digital payment methods (not including shipping, handling, processing fees, etc.).
Credit/debit card payments typically charge a two to three percent service fee (minimum). If you’re a small business making a payment of $10,000, those fees can quickly add up.
How to Avoid the Pitfalls of Using Checks
Checks are quite obviously very useful for small businesses, but how do you avoid the common pitfalls of checks? Believe it or not, but there are a few downsides to using checks.
Luckily though, most of these pitfalls can easily be avoided by keeping the following tips in mind:
Complete Funds Verification
While it might take some time to do so, asking the check’s issuing bank for a verification of funds is important if you want to make sure that your check is valid.
The bank doesn’t need to verify the funds though, and even a verification doesn’t mean that the funds are actually in the account (at the time of cashing).
With that being said, verifying funds is a safety measure that’s recommended. More details about verifying funds can be found on this page.
Don’t Immediately Spend Funds
Check clearing times vary from bank to bank. What this means for your business is that just because you cashed a check, doesn’t mean that money is immediately available for you to use.
It’s recommended to give your business a buffer time between cashing and actually using the funds from the check.
Verify Proper Date Formatting
It’s recommended to make it a requirement of your business that all checks be written using proper date formats (i.e. today’s date).
If you see a check that’s dated for the future, it might be wise to request one that’s properly formatted. This could save you a huge headache in the future.