It’s possible to save lots of some of the labor associated with check payments by converting to wire transfers, though one must be familiar with the changes in costs which will result. Paying with a cable transfer involves entering each supplier’s identifying bank number and account number into a computer database, which the accounting software then uses to compile a listing of wire transfer payments rather than check payments. It’s common for you to definitely review this set of wire transfers before it’s provided for a bank (in case you can find obvious errors in the amounts to be paid), where point the data is electronically transmitted to a bank, which immediately deducts the cash from their bank account and transfers it to the accounts of the recipients. This method completely avoids all of the check-cutting steps outlined at the start of this chapter. However, you can find other steps and costs connected with using wire transfers that certain must be aware of before using them. First, it is no longer possible to make the most of the mail float that complements check payments (the time interval before the recipient actually receives the check and cashes it), so a business will miss some interest income. This dilemma can be avoided by delaying the wire transfer payments to complement the payment delay related to mail float. Another issue is the price of each wire transfer. A business is likely to be charged a fee by its bank for every single wire transfer it handles.
The fee may go down if there is a large wire transfer volume, but the fee will still probably exceed the mailing cost of sending a supplier a check. However, if your company maintains a large cash balance at the bank, it is possible that the bank will reduce or eliminate these costs as a swap for keeping the cash invested at the bank. The last problem with wire transfers is one that keeps many companies from applying this best practice: The wire transfer doesn’t contain any details about what’s being paid, so an organization must still mail a remittance advice that lists each item. This means that an organization 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’s easy for a business to send remittance advises to its suppliers by e-mail, avoiding needing to mail this information. Linking an email remittance advice to a cable transfer is not yet on any accounting software packages, so a company would have to customize its accounting software with special programming to make this happen. Consequently, one must factor in the price of the programming when deciding to utilize e-mail transmissions. Given the large number of issues surrounding the usage of wire transfers, it is clear that the company considering its use should carefully weigh all the costs and benefits before implementing this best practice. Due to the large amount of issues connected with it, usually only larger companies with large check volumes are tempted to set up it.