Why Vendors Should Switch from Checks to ACH Payments

Introduction

Many vendors still rely on checks for business payments, unaware of the benefits of ACH payments. Checks are prone to delays, fraud, and high administrative costs. This blog explains why vendors should switch to ACH payments, highlighting the advantages of faster payments, improved cash flow, and enhanced security.

The Limitations of Checks in Vendor Payments

Slow Processing Times

• Mailed checks can take days or weeks to reach vendors.

• Delayed payments disrupt vendor operations and cash flow.

Fraud Risks

• Checks are susceptible to theft and forgery, making them less secure than electronic payments.

High Administrative Costs

• Processing, mailing, and reconciling checks incur unnecessary costs for both payers and vendors.

Why ACH Payments Are Better Than Checks

Businesses and vendors are increasingly switching from checks to ACH payments because ACH offers faster, more secure, and cost-effective payment solutions. Here’s a deeper look at how ACH payments outperform checks across multiple areas.

Faster Payment Processing

Checks require manual handling, including printing, mailing, and deposit verification, which can cause significant delays. Depending on postal services and bank processing times, it may take several days or even weeks for a check payment to be completed.

In contrast, ACH payments typically settle within 1 to 3 business days, and same-day ACH offers even faster processing options. Vendors can receive funds directly in their bank accounts without the delays associated with physical handling.

Example:
A retail supplier that switched from checks to ACH payments saw a 50% improvement in payment turnaround times, allowing them to reinvest in inventory sooner.

Enhanced Security and Fraud Prevention

Check payments are susceptible to theft, forgery, and fraud. Checks contain sensitive bank account details, which can be exploited if intercepted. According to the Association for Financial Professionals, check fraud remains one of the top fraud risks for businesses.

ACH payments, on the other hand, use encrypted electronic transfers to secure payment information. Fraud prevention tools like ACH positive pay match payments against authorized lists, reducing unauthorized transactions.

Example:
A service provider using ACH positive pay reduced fraud attempts by flagging unapproved ACH debits, protecting thousands of dollars in recurring payments.

Lower Transaction Costs

Processing checks involves hidden costs, including printing, postage, and bank fees for deposits and returns. Additionally, reconciling payments manually requires staff time and resources.

In comparison, ACH transactions are far more cost-effective. ACH transfers typically cost just a few cents per transaction, compared to $1 to $10 for processing a paper check.

Example:
A logistics company saved $25,000 annually in administrative costs after automating ACH payments and eliminating manual check handling.

Increased Cash Flow Visibility

When vendors rely on checks, they often lack visibility into when payments will be deposited. Tracking payments involves communication with clients, waiting for check clearance, and manual reconciliation.

With ACH payments, businesses benefit from real-time notifications and automated payment tracking. Vendors can see when payments are initiated and when funds are deposited into their accounts.

Benefits of Improved Visibility:

• Easier cash flow forecasting.

• Reduced follow-ups with clients.

• Faster resolution of payment disputes.

Example:
A construction supplier reduced late payment disputes by using automated ACH alerts to track payment statuses in real-time.

Easier Reconciliation and Automation

Manual check processing requires significant effort to match payments with invoices, track payment history, and record transactions. Errors in manual reconciliation can lead to missed payments, disputes, and even duplicate payments.

ACH payments can be fully automated and integrated with accounting software, making payment reconciliation faster and more accurate. Vendors can automate recurring payments and match them to invoices in real-time, reducing administrative workload.

Example:
An IT service company automated its recurring vendor payments with ACH, cutting reconciliation time by 70%.

Eco-Friendly and Paperless Transactions

Switching to ACH payments supports sustainability initiatives by reducing paper usage. Businesses no longer need to print checks, mail invoices, or use envelopes, making their payment processes more eco-friendly.

Benefits:

• Reduced carbon footprint by eliminating paper and mailing materials.

• Lowered printing and mailing costs.

Example:
A tech startup adopted paperless ACH payments, contributing to its corporate sustainability goals and saving $10,000 annually in mailing expenses.

Improved Vendor Relationships

Vendors value consistency and transparency in payments. By ensuring faster, more reliable payments through ACH, businesses strengthen trust with their vendors, who may offer better contract terms and discounts for early or timely payments.

Example:
A manufacturing company secured better pricing terms from key suppliers after switching to automated ACH payments, improving vendor satisfaction and trust.

No Lost or Returned Payments

Checks can be lost in transit, delayed by postal services, or returned due to errors such as incorrect amounts or signatures. These issues often lead to delays and additional administrative follow-ups.

With ACH payments, the risk of lost payments is eliminated. Vendors receive payments directly into their bank accounts, reducing the chance of errors and the need for reissuing payments.

How Profituity’s PlatformNext Simplifies ACH Payment Adoption

Profituity’s PlatformNext helps vendors transition from checks to ACH payments with features like:

• Simple Onboarding: Easy integration with existing payment systems.

• Fraud Detection: Protects payments with advanced security protocols.

• Customizable Workflows: Automates recurring disbursements.

Schedule your demo today and start benefiting from ACH payments!