(Article 2) Taking the "Paper" out of Paper Check
Is your business like 60% of those out there that still accept checks as payments? Odds are, yes. Checks, as you well know, are a bit of an odd duck in the payment landscape. While they are paper, they don't act like paper money. In truth, they behave a little more like a paper trail to the money. First, you have to deposit the check, then you have to wait for your bank to process it. This means the check traveling to the Federal Reserve, credits and debits going on within the Fed's branches. Finally, the money is actually taken out of the payee's account. This, of course, is assuming that everything went as planned. This is assuming that the payee actually had the money in their account when they wrote the check.
As a business owner, anything you can do to mitigate risk is usually well worth the time and effort it takes. Check 21, "lock box", or back office conversion, as it's called seems to be the silver bullet to reducing the risk associated with taking checks.
Since the advent of The Check 21 Act in 2004, checks are being converted into an electronic transaction at some point while they are en route to clearing. This process is known as “back office conversion” and truncation and is likely something you’ve seen at a grocery store in the last months.
For your business, not only does this mean getting your money faster, it also means knowing when you're not going to be receiving that money at all. And while we're on the subject of mitigating risk and reducing variables in your receivables processes, wouldn't you rather know that your customer didn't have the money in their account sooner, rather than later? |