Does your business still issue paper cheques to employees for compensation and reimbursements?
Scotiabank's Cheque Cost Issuance Model shows that costs can be anywhere from $15-25 per cheque. In some cases it's as high as $50 per cheque.
You might be thinking, a cheque is just a piece of paper - how can it possibly cost that much?
It's true that a small rectangular piece of paper doesn't cost much on it's own, but all the associated costs that come with issuing a cheque are significant. Distribution and payment costs such as bank charges on cheque clearing, account administration, reconciliation and storage costs (filing and processing after the fact) add up.
Postage is another cost that is significantly higher when issuing cheques - cheques are paper, and are entirely reliant on the snail-mail system.
Factor in materials and handling expenses associated with buying envelopes and paying employees to stuff and mail them, and the final cost can become expensive.
HR management software company PaySavvy determined the average cost to issue one cheque is $17. They illustrated this breakdown through a pie chart, which shows all the costs associated with the cheque issuance model.
How Prepaid Credit Cards Can Help
Prepaid credit cards are a cost-effective alternative to cheques and are widely used by businesses for reimbursing expenses, employee recognition, channel sales, issuing insurance/health benefits and many other applications.
Last month the Canadian government announced their evaluation of prepaid cards as an alternative to cheques and direct deposit, since they can be cheaper than processing cheques.
Here's are some reasons why prepaid cards are better than cheques:
- Postage fees are drastically reduced when reloadable prepaid cards are used since they only have to be mailed once
- Recipients receive their money faster, and can spend sooner (no more having to go to the bank to deposit, and then waiting 5 days for a cheque to clear)
- There are fewer opportunities for fraud with a prepaid card, since all cards come with Visa or MasterCard network security and fraud protection
- Lost/stolen procedures are simplified and can be resolved with a single phone call
- Those who don't have bank accounts don't have to pay fees at predatory payday loan centres to cash their cheque
- Funds can be withdrawn instantly at ATMs and can be used at any retail or online store worldwide that accepts Visa or Mastercard
Read more about the specific applications and benefits prepaid Visa cards have for compensation and disbursement programs here.
Companies prefer prepaid because funds are easily loaded onto cards via an online platform, load and spend data can be measured and tracked in a single place, restrictions can be placed on where the cards can be used, and the cards can be branded with the organization's logo and custom design.
The functionality and flexibility of prepaid cards lets organizations integrate the payment vehicle into all kinds of promotional campaigns, rebates, and contests. The applications are endless.