When it comes to owning a business of any size, making payroll, managing invoices, and overall bills and payments can be one of the biggest headaches. Whether it’s an issue on the bank’s side of not releasing funds on time, or internal problems of facilitating that payment, there are several things that can go wrong. These issues even plague the relatively simple process for direct deposits, and there are still companies that are utilizing paper checks or relying on a hybrid of payment options that further complicate the issue.
From the costs involved to the approval process to keeping vital documents such as paystubs and invoices attached for tax, auditing and other purposes, there are updated ways that can improve the process of disbursing a fund and even platforms available to allow multiple options and allow the payee to decide what form of payment best suits them.
Traditional Disbursement Options
While the paper check may still be appealing to some people, there are more efficient and cost-effective solutions to distributing funds. While the paper check may seem the easiest, there are a reasonable amount of costs involved such as the cost to produce the physical check, which can vary in cost between $4 and $20 per check. One of the biggest draws of the physical check, however, is the paper trail to keep tabs on the check itself and proof of payment.
For companies moving beyond paper, they have turned to ACH funds disbursement. ACH is certainly more cost-effective, with the max amount being around $3, but comes at a different price, delay. For an ACH disbursement, it takes anywhere between three to five business days. This requires submitting payroll several days in advance of the actual payday to ensure timely disbursements.
As businesses adapt to a changing economy – especially for those in the gig or contractor economy – ensuring accurate, reliable and secure payments for the services provided becomes even more challenging since these workers are not entered into a traditional payroll relationship.
Choosing Disbursement Options Suitable for Your Organization
Paper checks, ACH, Prepaid cards, real-time payments, the list goes on for ways organizations can disburse funds. With the help of fintechs, funds disbursement has become more tailored to organizations to offer a multitude of ways they handle payments. As companies seek to provide a better customer experience, they can even offer the payee more control in how they request to receive funds through robust disbursement platforms.
These capabilities have worked their way into multiple industries such as healthcare, insurance, airline and more to be able to quickly and efficiently issue rebates and rewards to customers. Real-time payments especially have received an increase of interest due to the lack of waiting period for a payment to process. Money can be accessed within seconds without an additional cost involved, because it is available through such platforms.
In addition to being more efficient and timelier for disbursements, robust disbursement platforms are more accessible and easier to manage than traditional paper documents. For businesses, it is common for executives to be on the go and tracking down a piece of paper is harder to do when away. With an accessible platform, it is easy to manage disbursements, access documents, approve transactions, etc. The data for each transaction can be retained digitally, providing an audit trail for future needs.
Incorporating an all-inclusive platform also enhances the relationship between payor and payee. Both parties have access to each disbursement in a siloed and secure environment. This capability especially helps organizations keep track of invoices, payments made, and official documents from a tax and regulatory standpoint, reducing the need for additional headcount to manage paperwork.
From a potential mix up in the mail to an account being compromised, there are several roadblocks to keep a disbursement from being completed. From a security standpoint, it is best for organizations to keep their account and transaction information siloed and in a secure environment.
In addition, keeping these transactions in a siloed environment makes organizations like financial institutions protected from both a security and regulatory standpoint. When it comes to arduous audits, auditors can focus on the information important to them while organizations are able to easily and quickly access the data necessary.
What should a company look for in a payments disbursement platform? The first thing that is important in a disbursement platform is variety, whether its ACH, virtual cards, debit or credit, faster payments methods such as Mastercard Send and Zelle. Such a platform needs to be able to accept and facilitate both. Another important option needed is a siloed secure environment that can include data to a transaction for better customer management and audit purposes.
Disbursements have long been limited to one or two methods that required attention from multiple individuals. However, with the advancements of payments and disbursements, the process has become seamless with the help of robust platforms. When it comes time to cutting your next check weigh out your options and see if this method is the best fit for your organization.