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5 Questions You Should Ask About Business Bill Payment With Your Bank

September 2, 2010

The majority of consumer bill payments are now made online. That is not the case for the bills you pay for your business. Most business bill payment is still made the old fashioned way: Printing, signing and mailing checks. Once that is done you have to follow up on whether your vendor received payment and reconcile with your accounting system.

If you are and SMB and thinking about doing electronic payments for your business using your online banking system, here are 5 questions you should ask yourself first (and make sure your needs are met!):

1. How will you access everything you need when you are making payment decisions? If you are like most businesses you need to refer to past payments, contracts, notes and lots of other information before authorizing each payment. Where does this information reside for your business today? When you are making online payments will you have to access other systems or make trips to the filing cabinet to get answers? If so, how much time does that take?

2. Is it easy to manage cash flow while making payments? Most banking systems will only show your current balance without reflecting outstanding past payments, future payments and payroll. When you schedule payments you'll need to make
sure you'll have enough cash to cover those payments or else fees could add
up. How easy is it for you to access that information today? If this is a requirement for your business you should look for a system that integrates cash management and banking.

3. Do you need to provide multiple people in your company access to the bill payment process? Unless you are a very small business you may need help managing the books either with additional staff or an outside accountant or bookkeeper. Does your banking system give you the controls to allow multi-user access or are you left doing manual work because your staff can't? You'll need to decide if you have the time to spare.

4. How much time are you willing to spend repeating yourself? If you make a lot of payments or pay a lot of vendors you'll end up doing a lot of duplicate data entry between your banking and accounting systems. This is especially true if your vendors change their remittance addresses often. You should make an honest assessment of how much time it will take to manage this process and whether it is worth it. We've spoken to businesses who pay hundreds of dollars a month in late fees due to mistakes so it can add up!

5. Are electronic payments with your bank really going to be free? At home, the majority of our payments are made to large vendors (banks, utilities, etc.). They are done electronically (not by check) and they are free. At work you will want to pay SMBs,
individuals, and employees electronically to save yourself hassle, ensure
payments are received on time, avoid vendor follow up, improve reconciliation, and
eliminate mailing errors. Those payments are usually not free from your bank. Make sure you are clear on who you want to pay electronically and what it will cost from your bank.

Key Takeaways:

  • Businesses should be benefiting from online/electronic payments just like consumers, however we have very different requirements
  • Make sure that the system you choose for bill payment for your business meets your requirements at work, not at home
  • Be careful that you are not
    being penny wise but pound foolish by taking on extra work using a "free" consumer-oriented service when you should be focused on growing your business!

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