Isn't it funny how old things become new again? We see it all the time in consumer products - the
new and improved laundry detergent, great new taste in a soft drink, more crunch
in a cereal, low fat, low carb food items. In traditional marketing, changes
to product formulas or food recipes are designed to extend the life cycle of
these products by making an old product appear to be something new.
Electronic funds transfer is definitely not new. It has been around for over 40 years and has not changed much. However, it seems to be enjoying a renaissance of sorts as banks and credit unions encourage businesses to pay their vendors and employees electronically rather than write checks. What is the driving force behind this phenomenon?
Technology has made it easier to commit check fraud and identity theft. New
color printers and scanners make near perfect copies of check stock. Banks
and credit unions process millions of checks every day through automated
clearing houses. As a result, numerous studies have shown that payor signatures
are not able to be verified. It is possible to cash checks on bogus accounts
and disappear with the money before the bank is alerted to the fraud due
to the time it takes for paper-based checks to clear.
Email communication and large centralized databases with confidential data
have raised concerns about privacy and the need to safeguard business and
personal information. Consequently, new Privacy Acts are now in place.
Well publicized business frauds have increased the scrutiny of businesses
and how well they are managed. This has resulted in new legislation such
as the Sarbanes Oxley Act. While most people associate
the Sarbanes Oxley Act solely with email retention and document storage,
SOX's real focus is on the management of internal financial controls. These
controls require detailing the accuracy and scope of accounting procedures
and certifying that the controls are helping to prevent fraud, theft and
inadequate disclosure.
In addition to legislative changes for better corporate governance, payment
associations have been pushing the use of check imaging technology to reduce
the time it takes for checks to clear and to limit the opportunity to cash
fraudulent checks. The Check Clearing for the 21st Century Act (Check 21)
went into effect on October 28, 2004.
This shift to image based processing of checks is supposed to not only improve
efficiency, but also allow financial institutions to introduce new services
that provide faster and more convenient access to check images for customers
than the common practice of enclosing cancelled checks with customer statements.
Ironically, banks are re-introducing "new" EFT based services to their business customers to encourage them to send electronic payment files and not to bother with the new check imaging solutions. If you find yourself in this situation, read on.
EFT Processing is for any company who wants to streamline the payment process
in their business, and tighten control over bank transfers by sending electronic
files to their bank instead of mailing and receiving paper-based checks.
You can pay a group of suppliers easily and cost effectively. You save
the time and cost associated with creating, distributing and reconciling
paper checks and your cash flow becomes more predictable.
Using EFT Processing, your AP payments will be made via the
electronic funds transfer functionality of your banking software and remittance
advices can be emailed automatically to the recipient as part of the process.
The use of EFT Processing can result in several benefits to your business:
reduced bank transaction fees, elimination of redundant data entry and
errors caused by manual entries, increased efficiency by processing payments
electronically, and avoiding the use of expensive check stationery.
Your vendors and employees will appreciate receiving their money on time,
every time without waiting in a bank line to cash a check. Because a deposit
can be made directly to their accounts, the payment is safer and more private
than a check.
So, if you are looking for a "new" EFT solution, consider EFT
Processing for AP and Payroll Payments.
For questions or more information, contact Laura Kasman at 215-702-8155 or lkasman@kastechco.com.
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