In the age of technology and digitized processes, paper checks are gradually becoming a thing of the past. They were once one of the dominant payment methods, but today, roughly only 7% of consumers pay bills with paper checks. With the rise of electronic invoicing, mobile and digital payments, and online banking, consumers and businesses alike now have a wide range of options for making and receiving payments.
As paper checks continue to decline, you're likely wondering what that means for your business. In this blog, we'll explore the pros and cons of paper checks and whether or not it's time for your business to stop accepting them.
The Pros of Accepting Paper Checks
Let's start with the benefits of accepting paper checks. For one, checks are a widely accepted form of payment that some customers and businesses still prefer. People who are hesitant to use credit cards or debit cards — due to security concerns or a lack of familiarity with digital payment methods — may feel more comfortable writing a check. Additionally, checks can be a more affordable option for some, as they don't carry the same fees and interest rates as credit cards.
Another advantage of accepting paper checks is that they offer flexibility that other forms of payment don't. For example, if a customer doesn't have enough money in their checking account to cover the purchase cost, they may be able to write a post-dated check. This is helpful for customers who need extra time to get their finances in order.
Finally, accepting paper checks can be a great way to build customer loyalty. By offering customers the option to pay with a check, you're showing them that you're willing to meet their needs and work with them to make transactions as easy and convenient as possible. This can go a long way toward building trust and creating a positive customer experience.
The Cons of Accepting Paper Checks
While there are certainly some advantages to accepting paper checks, there are also some significant drawbacks. For starters, paper checks are a slower payment method. You may have to wait for your customer to mail the check and then wait a few more days for the check to clear and the funds to reach your account. There's always the risk of payment delays and cash-flow issues. If funds are needed immediately, paper check payments are not the best option and can hinder cash flow and limit visibility into a business's finances.
Paper checks can negatively impact a business's accounts receivable process because they require manual tracking and recording. They make it more challenging to accurately understand the business's overall accounts receivable and identify outstanding payments that need to be collected. However, other payment methods, such as ACH, debit cards, credit cards and more, can be processed quickly to enable a more streamlined accounts receivable process.
Another downside of paper checks is that they are a less secure form of payment than other options. Recovering the funds can be difficult or impossible if a check is lost or stolen. And because checks can be easily altered or counterfeited, there's always the risk of fraud.
Finally, accepting paper checks can be costly. In addition to the labor costs associated with processing checks, there may be fees associated with depositing checks at the bank.
So, Should Your Business Stop Accepting Paper Checks?
Given the pros and cons of accepting paper checks, the question becomes: should your business continue to accept them? Ultimately, the answer will depend on various factors, including your business model, customer base and risk tolerance. For some businesses, particularly those that serve older or more traditional customers, continuing to accept paper checks may make sense. However, these businesses may find that checks are a critical part of their payment ecosystem and that removing this option could alienate some customers.
But for other businesses, the drawbacks of accepting paper checks may outweigh the benefits. Moving away from paper checks may be the right choice if your business wants to streamline operations, reduce costs and improve security. Payment methods such as ACH, debit cards and credit cards, digital wallets and more offer greater convenience to customers and can be initiated and approved from anywhere. Digital payments help customers pay on time and make accounts receivable more efficient for businesses.
As digital payment methods become more prevalent and consumers and businesses seek faster, more convenient and more secure payment options, the use of paper checks will likely continue to decline. For businesses that accept checks, this means exploring new payment options and keeping up with changing consumer preferences to stay competitive in an increasingly digital world. It also requires having a good payment processor in place.
REPAY offers best-in-class payment technology that enables operational efficiency, convenience, flexibility, security and a wide variety of payment methods. Contact us today to learn more about payment-acceptance options for your business.