It is possible to truly save a number of the labor connected with check payments by converting to wire transfers, though one must be familiar with the changes in costs that may result. Paying with a cord transfer involves entering each supplier’s identifying bank number and account number in to a computer database, that your accounting software then uses to compile a listing of wire transfer payments rather than check payments. It’s common for anyone to review this set of wire transfers before it’s provided for a bank (in case you will find obvious errors in the amounts to be paid), where point the info 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 process completely avoids every one of the check-cutting steps outlined at the start of the chapter. However, you will find other steps and costs connected with using wire transfers that one must be familiar with before using them. First, it is no further possible to take advantage of the mail float that goes with check payments (the time interval ahead of the recipient actually receives the check and cashes it), so an organization will lose some interest income. This problem may be avoided by delaying the wire transfer payments to complement the payment delay associated with mail float. Another issue is the price of each wire transfer. A business is going to be charged a fee by its bank for every wire transfer it handles.
The fee may go down if you have a big wire transfer volume, but the fee will still probably exceed the mailing cost of sending a supplier a check. However, in case a company maintains a large cash balance at the financial institution, it is possible that the financial institution will certainly reduce or eliminate these costs in trade for keeping the money invested at the bank. The past problem with wire transfers is the one which keeps many companies from using this best practice: The wire transfer doesn’t contain any information regarding what is being paid, so a company must still mail a remittance advice that lists each item. Which means a company must still mail something to the supplier, so that it loses any prospect of savings in this area. However, with the advent of the Internet, it’s feasible for an organization to send remittance advises to its suppliers by e-mail, avoiding being forced to mail this information. Linking an e-mail remittance advice to a line transfer is not yet available on any accounting software packages, so a business would need to customize its accounting software with special programming to produce this happen. Consequently, one must element in the cost 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 quantity of issues connected with it, usually only larger companies with large check volumes are tempted to set up it.