It is possible to save lots of a number of the labor associated with check payments by converting to wire transfers, though one must know about the changes in costs that will result. Paying with a line transfer involves entering each supplier’s identifying bank number and account number in to a computer database, that the accounting software then uses to compile a listing of wire transfer payments in place of check payments. It’s common for you to definitely review this listing of wire transfers before it’s provided for a bank (in case you can find obvious errors in the amounts to be paid), of which point the info is electronically transmitted to a bank, which immediately deducts the amount of money from the company’s banking account and transfers it to the accounts of the recipients. This method completely avoids all of the check-cutting steps outlined in the beginning with this chapter. However, you will find other steps and costs associated with using wire transfers that one must be aware of before using them. First, it is no more possible to make the most of the mail float that complements check payments (the time interval ahead of the recipient actually receives the check and cashes it), so a business will miss some interest income. This problem can be avoided by delaying the wire transfer payments to fit the payment delay connected with mail float. Another issue is the cost of each wire transfer. An organization is going to be charged a fee by its bank for every wire transfer it handles.
The fee may drop if there is a big wire transfer volume, but the price will still probably exceed the mailing cost of sending a supplier a check. However, if a company maintains a sizable cash balance at the financial institution, it’s possible that the bank will certainly reduce or eliminate these costs as a swap for keeping the money invested at the bank. The last trouble with wire transfers is one that keeps many companies from by using this best practice: The wire transfer doesn’t contain any details about what is being paid, so an organization must still mail a remittance advice that lists each item. Which means a company must still mail something to the supplier, therefore it loses any prospect of savings in this area. However, with the advent of the Internet, it is possible for a business to send remittance advises to its suppliers by e-mail, avoiding having to mail this information. Linking an email remittance advice to a cord transfer is not even available on any accounting software packages, so a company would need to customize its accounting software with special programming to make this happen. Consequently, one must aspect in the expense of the programming when deciding to utilize e-mail transmissions. Given the large number of issues surrounding the utilization of wire transfers, it’s clear a company considering its use should carefully weigh all the costs and benefits before implementing this best practice. Because of the large amount of issues connected with it, usually only larger companies with large check volumes are tempted to put in it.