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There is an alternative.
Electronic payments in the form of ACH transactions are on the
rise. Electronic transactions allow small companies, including
newspapers, to accept electronic checks via phone, Web, or fax.
Paper checks can even be scanned and converted to electronic checks,
saving the trip to the bank and making returned items easier to
deal with.
Confused? Don’t be, because you’re
probably paying some of your bills via ACH already. When cable,
utility, or mortgage companies offer you the option to have your
bank account debited automatically each month, they are using
an ACH transaction. An ACH transaction moves funds from one bank
account directly to another.
The Federal Reserve set up the ACH network
in the early 1970’s, and for the most part it’s being
used by financial institutions and large companies — the
ones that could afford the expensive technology. Use of the system
has increased dramatically in recent years, as the governing board,
National Automated Clearinghouse Association (NACHA) has developed
rules flexible enough to accommodate Web and telephone initiated
transactions.
According to NACHA, in 2001, total volume
of transactions was up by 16.2%, approaching 8 billion annual
transactions. The volume increase from 1999 to 2000 was 12.4%.
Much of the transaction growth comes from industries which are
newly adopting ACH transactions for their huge benefits, and many
of them are business to business transactions.
What’s different now? In the last seven
or eight years, many small technology companies have come on the
scene to deliver ACH capabilities to small companies. Whereas
many banks require several months of implementation time and minimum
monthly transactions in the thousands, these small companies,
called Third Party Processors in industry-speak, are nimble and
can serve companies collecting or writing a few hundred or even
a few dozen checks per month. Since access to the ACH network
is limited to financial institutions, each Third Party Processor
must have an agreement with one or more banks to route their transactions.
Newspapers may find it beneficial to use
ACH transactions.
Do you mail invoices to advertisers and wait
weeks for payment? No more, as now you can take a payment by check
over the phone or internet when an advertiser sends you copy.
Your contract advertisers will appreciate not having to write
the same check month after month. You can ask them to sign an
agreement for an automatic debit. And your subscription department
will have new options for capturing subscriptions and renewals,
because now they can capture a payment during a phone call, or
send an email reminder with a link to a secure payment screen.
And, unlike other systems, the ACH network allows you to make
a payment as well as take a payment, so now you can pay all of
your suppliers electronically, cutting down on the costs of printing
and mailing checks.
The cost of ACH transactions is low compared
with other options. While there is a wide range of prices, ACH
transactions are usually charged per transaction, and the cost
is usually well under a dollar per transaction, typically in the
thirty to fifty cent range. Credit card fees are based on a percentage
of the purchase, so for large dollar-value transactions the savings
can be dramatic. Paper checks have hidden costs, including processing
time, trips to the bank, loss of float while waiting for checks
to arrive and clear, and high fees on returned items.
When choosing a provider, look carefully
at the technology as well as the costs. Make sure a service provider
can do everything you require, including issuing credits (making
payments) as well as debits (taking payments.)
The best solutions allow you to enter payments
directly or to upload a batch file, so, for example, if you maintain
your own database of recurring advertisers, you can create a payment
file without having to duplicate your data. Ask also about the
capacity of the provider’s systems. You don’t want the
system to crash when you are expecting a big payment to clear.
And ask about their holding period. Most companies will "hold"
your cash in a clearing account for a few days to net out returned
checks. In most cases you will still receive your cash quicker
than with a paper check.
The benefits will include a clean desk and
improved cash flow.
Newspapers, like many other industries including
health clubs, utilities, mortgage companies, and insurance companies,
will most likely say farewell to the paper check.
Please call us toll free at 1-800-320-7258
for a free consultation!
Could your newspaper benefit from a preogram to receive payment electronically? Get started today!
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