It is possible to truly save a few of the labor related to check payments by converting to wire transfers, though one must be aware of the changes in costs that’ll result. Paying with a cord transfer involves entering each supplier’s identifying bank number and account number right into a computer database, that your 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 list of wire transfers before it is delivered to a bank (in case there are obvious errors in the amounts to be paid), at which point the info is electronically transmitted to a bank, which immediately deducts the cash from their banking account and transfers it to the accounts of the recipients. This method completely avoids every one of the check-cutting steps outlined in the beginning of this chapter. However, you will find other steps and costs related to using wire transfers this 1 must be aware of before using them. First, it is no longer possible to take advantage of the mail float that goes with 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 may be avoided by delaying the wire transfer payments to match the payment delay associated with mail float. Another issue is the cost of each wire transfer. A company is going to be charged a fee by its bank for every single wire transfer it handles.
The fee may drop if you have 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 big cash balance at the bank, it’s possible that the bank will certainly reduce or eliminate these costs in trade for keeping the cash invested at the bank. The final trouble with wire transfers is the one that keeps many companies from by using this best practice: The wire transfer does not contain any details about what is being paid, so a company must still mail a remittance advice that lists each item. Which means that a business 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 is possible for a company to send remittance advises to its suppliers by e-mail, avoiding being forced to mail this information. Linking an email remittance advice to a line transfer is not yet 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 aspect in the price of the programming when deciding to make use of e-mail transmissions. Given the large quantity of issues surrounding the use of wire transfers, it’s clear that the company considering its use should carefully weigh all the expenses and benefits before implementing this best practice. Because of the large amount of issues associated with it, usually only larger companies with large check volumes are tempted to put in it.