Articles
Improve Cash Flow With Check 21
September 16, 2008
•Case Study: Improve Cash Flow With Check 21
By Ken Cogdon, Integrated Solutions magazine
While electronic forms of payment (e.g. EDI [electronic data interchange], ACH [automated clearing house], debit and credit card transactions) are gaining popularity in the United States, good old-fashioned paper checks are far from extinct. In fact, according to a report by the Federal Reserve, more than 30 billion paper checks were written in the United States in 2007. Food For The Poor is all too familiar with the continued prevalence of check payments. This charity that provides food, water, shelter, and medicine to poor countries throughout Latin America and the Caribbean still receives more than 90% of its donations in paper check form. Now, one might argue that a dollar is a dollar whether it's received via check or electronic transmission. However, consider the following:
- Paper checks require more labor to process and therefore are more costly than electronic forms of payment. In fact, according to the Federal Reserve, processing a paper check costs an average of 4.5 cents per item, while processing an electronic payment costs only 1.3 cents per item.
- Due to the multiple touch points (i.e. lockbox, bank) a paper check must pass through to be cleared, it can often take several days for funds to actually be available for spending. With electronic transfers, funds are available within the same business day and often instantaneously.
•Case Study: Improve Cash Flow With Check 21
Used with permission from Integrated Solutions magazine.
