Electronic Funds Transfer: Getting Digital with Your Dollars

by | Oct 24, 2019

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Paper checks are going the way of the dinosaur. That’s as true for small business payments as it is for personal finance. It’s easy to understand why. Checks are inconvenient, expensive, and prone to getting lost in the mail (especially if the payee address is out of date).

If you’re still paying with paper, it might be time to bring your business into the 21st century. Let’s look at electronic funds transfer (EFT). Simply put, EFT is sending money from one party to another online. It can be performed with a computer or smartphone, between accounts at the same bank or different institutions, and with several different types of payment systems. All a transfer requires is an account with money, and someone to send it to.

Taking payments digital is great for vendor-client relationships, because payment happens more quickly and is more reliable than paper. It’s also easier—all the rigamarole associated with pulling out a paper check, writing it out, putting it in an envelope, and putting it in the mail is replaced with just a few clicks. It also empowers small business owners to overcome obstacles not possible with paper. For example, if you need to pay a subcontractor based in Canada immediately to get the ball rolling, an EFT facilitates that. Or, if you accidentally run out of an everyday essential, an EFT enables you to pay the vendor, even if you’re away from the office or out of checks.

Here are some of the many types of EFT you might find useful as a small business professional.

Direct deposit/automated clearing house (ACH)

The use most commonly associated with this is payroll. It also can be used to make recurring payments on rent, car loans, and other regular bills. The recipient sees the money land in their account on the appointed date; they don’t have to do anything to accept the cash. The safety of the global makes it popular—in 2018, about 23 billion payments across the world happened on the network. My Small Business Pro uses it both internally and with clients for payrolls and bills. Turnaround is generally 1-4 business days, according to provider and accounts.

PayPal

This method is popular with friends sending money to each other, independent vendors accepting funds from individuals, and some online vendors. It’s easy to use, but be aware that it might incur additional fees, especially if you’re the payee looking to get your money out of PayPal holding.

Wire transfer

Commonly used for international payments, wire transfers are liked because of the convenience and speed (payment typically is received within hours). On the other hand, there may be fees to send and/or receive money. What’s more, different countries have different codes, address formatting and additional requirements, and you have to have the other party’s information, so the process can be complicated.

QuickPay or Zelle

You might be more likely to encounter these methods when you’re dealing with independent contractors, or if you’re sending money to a friend. They’re good because they’re very convenient and the transfer is virtually instantaneous. However, they can be bad if you type one wrong character in the email and send the money to a complete stranger. Let’s hope whoever you sent it to is a good Samaritan…

Venmo

In one word: don’t. Sure, it’s easy to use, and because Venmo is a popular way to pay back friends and family, people tend to be more familiar with this method than others. However, like QuickPay/Zelle typing one letter can lead to disaster, and this method is not bank insured. Neither makes it great for business payments.

Sending money online can take you outside your comfort zone, especially if you’re on the technologically impaired side. Don’t be afraid—EFT’s ease, security, and convenience makes it worth getting over your fears. MSBP can help. We are happy to explain your options in detail, determine which system works best for you, even set up a system and issue payments on your behalf. Reach out to me at Daliah@MySmallBusinessPro.com and let’s get started.

Trust and Commitment in a Remote Team 

A couple of months ago, I made my first overseas trek since 2017 – not for vacation – but to meet with the rest of the Fritz Financial Solutions team of accountants in the Philippines. It was important to me to show these women the time and attention needed to...

Client Spotlight: Isaac Crawford  

Isaac Crawford is a ray of sunshine who went after his dreams and came out on top when he started his own hair salon. He has been in the hair industry for almost 15 years and has serviced hundreds of clients in Chicago. An inspiration to entrepreneurs, we are excited...

MEET THE TEAM: Milen Gomez, Staff ACCOUNTANT

6 months ago, we added a new staff accountant to our team: Milen Gomez. Our newest staff accountant is the best we could ask for with her incredible attention to detail and efficient mindset. She has been an essential part of our continued growth by always putting her...

Client Spotlight: Danielle Suchala Klausing

It’s always an exciting time when you’re ready to take the next step in life and buy a home. But finding that perfect home can be a challenge, especially if you’re not familiar with the real estate industry. That’s where Danielle comes in. With over 7 years of...

Who is responsible for payroll?

One of the most expensive resources for any business is payroll. It’s also one of the most important. We are firm believers that people are your most valuable asset, so it’s no wonder that payroll gets costly. Especially if you are a professional services company, and...

Let’s just Write it off! 

Ahhh the joys of being a business owner. You get to set your own schedule, be in complete control of your success and of course, deduct your business expenses.   Just like all of those statements, there are some pros, cons and a lot of misconceptions that go...

How to beat tax stress

It's March and that means two things:   Tax season is in full swing.   Chicago winter is about halfway over.   There isn‘t much a financial consultant can do when it comes to the weather, but when it comes to making your tax season less...

What solution can Fritz Financial find for you?

Schedule a meeting with Daliah Fritz