With So Many Payment Options, How Do You Choose the Best One For You?
May 13, 2022
Estimated Reading Time: 4 minutes
We all know the feeling. You step up to a buffet with an empty plate and suddenly are overwhelmed by the sheer number of choices available to you. Do you get the roast beef? The chicken? The fish or the pork chop? What about sides and dessert?
A wealth of options can lead to a sense of indecision. How do you determine what you really want or what’s best? That’s the problem facing many finance departments today. From virtual credit cards and e-check to ACH, wire transfers, or traditional paper checks, there are more ways to pay than ever before. So, which one is best for your business?
What’s on the menu?
Before making a decision, it’s important to understand what’s on offer — especially if you have no idea what it is. Here are the primary remittance options available:
- ACH/EFT – An increasingly popular method of making payments, ACH (or EFT in Canada) is an electronic fund transfer system. The network functions like a hub that makes it easier to move money from one financial institution to another. Both quick and cost-effective, ACH is frequently used by companies to pay their employees.
- E-Check – Put simply, an e-check is simply a digital version of a paper check. They function in the same manner but can be processed much faster. A clearinghouse is responsible for moving the money between banks. Authorization can take place online, over the phone, or through a signed form.
- Virtual Credit Card – a temporary credit card number for online purchases — and for some over-the-phone purchases. They can be single-use or designed with a dollar limit. They are processed in the same manner as a physical credit card.
- Wire Transfer – An electronic transfer of funds that takes place through a network administered by a bank or other transfer agency. The individual initiating the transaction makes the payment at the remitting bank and includes the payee’s name, bank account number, and amount being sent. These are typically used internationally.
- Check Payment – This has been the tried-and-tested method of making one-off payments for decades. A check is a physical document signed by the customer which instructs their financial institution to pay another party. Given the length of time, they take to process — as many as seven days — they are being increasingly replaced by digital methods.
Making the right choice
Several factors will influence which payment method is best for your company: What is the size of your transactions? What vendors do you prefer, and where are they located? What does each method mean for you in terms of time and financial investment?
- Why Use ACH/EFT: Faster and more secure than paying by check, this method can be handled remotely and is quick to process. That said, it is important to remember that payments may take up to five days to clear.
- Why Use E-Check: Using this method eliminates the costs associated with printing, mailing, and handling paper checks, and it is also speedier. E-Checks also work well for remote workers, given that the transactions can be handled over the phone or online. They do, however, carry some risk of fraud.
- Why Use Virtual Credit Cards: An increasingly popular option, with virtual credit cards (VCCs) you can approve payments and release them to vendors in your AP software. They also come with cashback opportunities and increased security. VCCs are also frequently available through automation software, including Beanworks.
- Why Use Wire Transfer: This is a good solution for companies with a lot of international business, as payments can be made anywhere in the world. However, it is worth bearing in mind that wire transfers come with an associated fee.
- Why Use Paper Checks: Perhaps the most advantageous thing about using traditional checks is the fact that they are familiar and remain a fairly common method of payment. That said, they are less secure, take more time to clear, and are expensive to process. Of all the payment methods listed, paper checks are most deserving of being phased out.
For organizations still tied to manual methods, it is worth taking the time to explore the time and money savings available through automation. And if you’ve already gone digital, you should make sure that your payments are being made in the fastest, safest way possible. A solution like Beanworks can help ensure that your vendors are paid quickly, cheaply, and efficiently.
To learn more about how to improve your AP process, check out “Acheive No-Cost Payments in 2022”, an on-demand webinar
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