Unless you run a morally questionable business, you can’t run things on cash alone. You need a bank account (or 2, or 3…). Having one is always a pain. You will be charged too much, treated too poorly, and rewarded too minimally. Get past the idea of it being a perfect experience.
Instead, let’s just try to get those fees down as low as possible. There are quite a few small ways to accomplish this, but only one that seems to be at the root of so many of our cash flow problems. Brace yourself, ‘cause you may not like it.
Stop Writing Cheques
Gasp! What? Are you insane??!! No, I’m dead serious. In all my years of helping small businesses, I’ve seen more get in trouble because of those evil little pieces of paper.
Instead, I recommend paying electronically for as many things as possible. Use your debit card, *credit card, email money transfer, or electronic bill payment. Where available, setup an automatic withdrawal of your essentials like utilities, phone bills, and memberships.
* If you’re going to use your credit card, it only works if you’re paying off the full balance each month. Otherwise, this is just going to cost you more money.
Why do I think cheques have to go? 3 reasons.
Material Costs
Cheques are expensive, considering what they are. Personal cheques cost you about $0.50 each, and business cheques can creep above $1.00 each. You can fit at least 3 of them on a sheet of 8.5x11” paper. Would you pay $3/sheet for a pack of paper? Yes, they’ve got features that a sheet of 20lb paper doesn’t have, but still…$3/sheet!!
Transaction Costs
Unlike the much advertised unlimited personal bank accounts, small business accounts are much more expensive. You’re going to pay about $1 in bank fees each time you write a cheque. That’s on top of the $1 the physical cheque cost you. Electronic transactions usually cost about half that or less, depending on your bank. It’s not unusual for me to see $200-300 in monthly fees on my clients bank statements.
NSF Fees
I know, you’re an amazing owner who has never bounced a cheque, and still keeps your physical chequebook balanced. For every one of you, there are probably 10 other owners who can’t make that claim. NSF fees are going to increase to $42.50 this year. $42.50 for every cheque that goes NSF!!
In a lot of small businesses, money is tight. When you write the cheque for $200, you have $250 in your account, and no intention of spending any of it until that cheque clears. Guess what? Unexpected things happen before that cheque clears. Suddenly you’re stuck paying $42.50 to your bank, and another $30 to the vendor.
Plus, let’s be honest here. You write cheques for 2 main reasons.
1. The vendor only accepts cheques – this is becoming a smaller list every year. Vendors have been burned by cheques too, so they’re much better at taking cheaper forms of payment.
2. You’re stalling – you need parts for that order today, or your product won’t ship on time. You write a cheque and pray that one of your delinquent customers pays you between now and when it clears. They don’t.
Let’s face it; cheques are going away soon. Banks already got rid of the humans who used to scan cheques manually, which completely removed any security that a cheque possessed. I was told by a bank employee that less than 5% of all cheques ever get reviewed for errors. I’ve seen firsthand many post dated cheques get cashed early, and others with glaring mistakes pass unnoticed. Why bother anymore? Save yourself the hassle and the expense, and rid them from your business for good.
