How To Choose The Right Payment Method For Your Business
May 14, 2021
Estimated Reading Time: 4 minutes
From virtual credit cards to more traditional ways to pay, there are plenty of payment methods available. Gone are the days when everyone waited for a check to arrive in the post. There are now multiple ways of paying a vendor or supplier electronically, which all work differently.
The right way to pay can boost your business’ reputation with vendors and customers as well as saving time and money. Navigating the options can be confusing, so Beanworks has produced a guide to help you decide what works best for your company and your suppliers.
If you have historically relied on manual processes including writing checks to pay vendors, it is worth considering what you could save by automating the process.
Payment methods: what’s out there?
- ACH/EFT: a network used for moving money electronically between bank accounts. It is fast and cost-effective and frequently used by employers to pay their employees’ salaries.
- E-check: An e-check is a digital version of a physical check. It uses a clearinghouse to send money from one bank account to another. Electronic check processing works in a similar way to the paper kind, only faster. Authorization can be given by an online form, signed form or over the phone.
- Virtual credit cards: a single-use credit card number generated during a transaction. Because there is no physical card associated with it, it cannot be used for in-person transactions, and vendors will process the card number without seeing it.
- Wire transfer: a transfer of funds done electronically across a network of banks or transfer agencies. Senders pay for the transaction at the remitting bank and provide the recipient’s name, bank account number and the amount transferred. It is often used to make payments internationally.
- Check payments: the traditional way of making a one-off payment. It is a physical document signed by a customer instructing a bank or credit union to pay another person or company. Checks can take seven days to clear, and this method is made more difficult now that many people are working remotely since the process cannot be done entirely digitally.
The right way to pay can boost your business’ reputation with vendors and customers as well as saving time and money.
What to consider when deciding which method to use
There are various things to take into account when you are choosing a payment method. Before you make a decision, think about the size of your transactions, what your vendors prefer and where they are, and what each method will mean for you in terms of time and money.
- Why use ACH/EFT payments: ACH/EFT is secure and faster than paying by check. It can still take about five days for payments to clear, however. One of the advantages to using ACH/EFT is that it is quick to process, and can be done remotely.
- Why use an e-check: E-checks are much faster and cheaper to process than traditional checks without printing, mailing and handling costs. Since they can be done using online forms or over the phone, e-checks are also more convenient for remote workers – but they do carry some risk of fraud.
- Why use virtual credit cards: With virtual credit cards, payments can be approved and released to vendors directly from within your accounts payable automation software. They also offer attractive cash-back opportunities, helping you to save money, and offer a unique set of security benefits. You can get a virtual credit card through your automated payments software, including Beanworks.
- Why use wire transfers: One of the advantages of using a wire transfer is that you can pay anyone anywhere in the world, but they can be more difficult to trace than other methods. Unlike some other electronic forms of payment, wire transfers cost money.
- Why use check payments: The length of time checks take to clear is seen as a negative by many vendors; however, a check is still the preferred way for businesses to pay individuals and is widely accepted. If you still want to pay by check, automating the process can save you time and money.
Faster, safer and more secure
If you have historically relied on manual processes including writing checks to pay vendors, it is worth considering what you could save by automating the process. If your company does move to make payments electronically, select a secure method that is also fast and cost-effective. When this process is integrated with your accounting software such as Beanworks, vendors can get paid quickly, cheaply, and safely.
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