It is possible to save some of the labor related to check payments by converting to wire transfers, though one must be aware of the changes in costs which will result. Paying with a cable transfer involves entering each supplier’s identifying bank number and account number right into a computer database, that the accounting software then uses to compile a listing of wire transfer payments instead of check payments. It is common for someone to review this list of wire transfers before it is sent to a bank (in case you will find obvious errors in the amounts to be paid), at which point the info is electronically transmitted to a bank, which immediately deducts the amount of money from the business’s banking account and transfers it to the accounts of the recipients. This technique completely avoids all the check-cutting steps outlined at the start of this chapter. However, you can find other steps and costs related to using wire transfers any particular one must be familiar with before using them. First, it’s no further possible to take advantage 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 lose some interest income. This issue could be avoided by delaying the wire transfer payments to fit the payment delay associated with mail float. Another issue is the expense of each wire transfer. An organization will soon be charged a fee by its bank for each and every wire transfer it handles.
The fee may drop if you have a big wire transfer volume, but the price 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 lender, 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 last problem with wire transfers is one that keeps many companies from applying 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 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’s easy for a company to send remittance advises to its suppliers by e-mail, avoiding needing to mail this information. Linking an e-mail remittance advice to a line transfer is not even available on any accounting software packages, so a business would need to customize its accounting software with special programming to make this happen. Consequently, one must factor in the cost 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 expense 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.