It’s possible to save some of the labor associated 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 into a computer database, that your accounting software then uses to compile a listing of wire transfer payments as opposed to check payments. It’s common for anyone to review this set of wire transfers before it’s delivered to a bank (in case you can find obvious errors in the amounts to be paid), where point the information 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 technique completely avoids all of the check-cutting steps outlined at the start of this chapter. However, there are other steps and costs connected with using wire transfers any particular one must know about before using them. First, it is no further possible to take advantage of the mail float that matches check payments (the time interval ahead of the recipient actually receives the check and cashes it), so a business will lose some interest income. This problem could 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. A company will be charged a fee by its bank for each and every wire transfer it handles.
The fee may decrease if there is a sizable wire transfer volume, but the price will still probably exceed the mailing cost of sending a supplier a check. However, if your company maintains a sizable cash balance at the financial institution, it’s possible that the lender will certainly reduce or eliminate these costs in exchange for keeping the cash invested at the bank. The last problem with wire transfers is the one which keeps many companies from using this best practice: The wire transfer doesn’t contain any information about what is being paid, so a business must still mail a remittance advice that lists each item. This means that a company must still mail something to the supplier, so 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 needing to mail this information. Linking an e-mail remittance advice to a cable transfer is not yet on any accounting software packages, so an organization will have to customize its accounting software with special programming to create this happen. Consequently, one must element in the cost of the programming when deciding to utilize e-mail transmissions. Given the large amount of issues surrounding the utilization of wire transfers, it is clear that a company considering its use should carefully weigh all the expense and benefits before implementing this best practice. Due to the large amount of issues associated with it, usually only larger companies with large check volumes are tempted to install it.