If you’re still using cash or paper checks to run your business, it may be time to rethink your payment strategy. Electronic payments have changed the game – offering speed, security, and cost savings. From Automated Clearing House (ACH) transfers to services like Zelle, digital payments make it easier to manage your money and keep your business moving.
Traci Smith, Senior Vice President and Director of Treasury Sales and Strategic Partnerships at Cogent Bank, says Automated Clearing House (ACH) payments are the most common type of electronic payment. ACH has been around for years and is a trusted payment method used by businesses of all sizes. You can also use services like Zelle to send money directly from your bank account. According to Federal Reserve data, ACH credit transfers overtook checks back in 2012 and have grown rapidly ever since. In fact, NACHA reports that same-day ACH payments hit over 1.2 billion in 2024, totaling $3.2 trillion.
Why Electronic Payments Over Checks?
Paper checks are slow, expensive, and risky. Someone must print the check, stuff it in an envelope, add postage, and hope it arrives safely. Then the recipient must deposit it. This process opens the door to fraud. Thieves steal checks from mailboxes, change the payee or amount, or use them to create fake checks.
“Electronic payments allow you to control your payables and the timing of when the money will leave your account,” Smith explains. “With a check, there’s float, but it’s still an unknown when that payment will hit your account.” ACH payments are a quicker and less expensive payment method, with the added benefit of giving you more control over the payment process.
Save Time and Money
Sending paper checks is an expensive option including the cost of paper, postage, the time spent approving and mailing, and the delay in getting paid.
Smith says electronic payments are a game-changer, especially for businesses with teams in separate locations. Gone are the days of manually inputting the information. You can upload a payment file or use your bank’s online banking system to send payments quickly and securely.
She estimates a paper check could cost $5 or more by the time it’s issued, mailed, and deposited. An electronic payment? Just a few cents and a few seconds.
Most Vendors Prefer ACH
Electronic payments aren’t just beneficial for you, they’re beneficial for your vendors too. ACH payments are faster and more reliable. Some vendors even offer discounts for using them. Others may hesitate to work with businesses that still rely on paper checks.
“Vendors love to receive payments via ACH. It’s an immediate credit when the bank gets it with the effective date, and they don’t have to process a check,” Smith says. “You don’t have to go to the bank; your employee doesn’t have to take the time to make a check deposit via a remote deposit scanner or mobile banking app. With ACH, it’s just automatically in your account.”
ACH vs. Credit Cards
While credit cards are great for consumers, they’re not always ideal for business payments since the company receiving the funds must pay a fee. ACH payments are cheaper and more efficient, and at times, vendors may offer a discount for such electronic payments.
Smith says ACH payments can cost around $0.15 to send, while credit card payment fees are around 3% of the purchase price. That adds up fast, especially for large transactions.
“The balance here is that credit card usage is good for the cardholder because they potentially accumulate points or a rebate, but the vendor accepting the credit card payment must pay a percentage of that payment which hits their bottom line. It is not unusual for vendors to refuse to accept credit cards, especially if it’s B2B,” Smith says.
Why Cash Isn’t Always King
Some businesses still use cash, which is costly and comes with layers of risk. You must count it, protect it, and take it to the bank. That means more time, greater risk, and a more costly transaction.
“Using cash is an expensive payment form when you factor in the time and money spent physically going to the bank. You can’t put cash into a scanner like you can with a check,” Smith says.
Automate and Streamline
Electronic payments save time and money, and Cogent can help you automate the process. That means fewer manual tasks, greater accuracy, and lower costs all around
including operating costs such as payroll, gas, and travel. This all adds up to more time spent on value-added tasks that help grow your business.
The bank starts the automation process by understanding your payment flow and closely reviewing vendor terms. “Customers are very happy when it’s complete because it really does streamline their process at a cost lower than it’s ever been before,” Smith says.
Staying Ahead of Fraud
Financial institutions take great care in ensuring that electronic payments are secure, but scammers still try to exploit them. They might hack your email or impersonate a vendor to trick you into changing payment details. “In one case, scammers redirected all company emails and tried to add fake signers to the bank account. It is Cogent’s policy to call signers to ensure they are legitimately a new signer, and that’s when we found out that fraudsters had hacked his email,” Smith says.
“If a business receives an email with a request to update their payment information such as the routing number and account number, it is important to take the time to verify that the request is legitimate. Most of the fraud we’re seeing is from those companies not validating with the vendor to see if that was a legitimate e-mail or not,” Smith says. “That’s the biggest kind of risk, that the payment will go to somebody else due to following fraudulent instructions in a referral email. We strongly encourage our customers to call their vendors with any kind of payment change request.”
Cogent Bank uses ACH Positive Pay to help prevent fraud. This service allows you to review incoming ACH transactions and set rules to accept or decline based on the vendor or amount.
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Disclaimer: The information contained herein is for informational/educational purposes only. The views and opinions expressed in this document may be those of the individuals and may not necessarily reflect those of Cogent Bancorp and its subsidiaries and affiliates, or the entities they may represent. Content contained herein may be used in connection with the advertising and/or marketing of products offered by Cogent Bank or Cogent Private Wealth. The material is not intended to provide or substitute for legal, tax, or financial advice or to indicate the availability or suitability of any Cogent Bank product or service.
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