The check's not in
the mail: More
companies adopt electronic payments
there was something that could save you time or money, or both,
would you be interested?
More and more small-business owners
are using electronic bill payment because it provides those advantages,
but they're not the only ones who like them.
The Federal Reserve is promoting electronic
payments because they help the nation's banking system run more
efficiently. Banks are promoting them because such payments are
cheaper and easier for the financial institutions to process.
Tom Hirz, who owns Convenient Food Mart in Westlake,
Ohio, uses automatic deductions to pay his business's Ameritech
phone bill and East Ohio Gas bill. He gets monthly statements telling
him how much has been taken out of his account.
The mart is an Ohio lottery outlet and Hirz
electronically antes up $6,000 to $10,000 each week to the state.
It's the money his store has taken in from lottery customers, minus
That suits Hirz fine. "I like paying bills that
way, and I would be interested in doing it more.
"The companies push it, because they know they'll
get paid. And as long as you make sure how much money is being taken
out, it makes things easier for you, too."
flavors of systems
Electronic payment systems come in three shapes: business-to-business
transfer systems, computer banking software and a bank's proprietary
Internet transaction system.
For small-business owners, one of the easiest
ways to pay bills electronically is to have a bank account automatically
debited each month for certain recurring bills, especially if the
vendor is a consumer-friendly company like an electrical utility
or phone company.
While setting up debit-payment plans for certain
bills won't directly improve a business owner's credit rating, banking
experts say, there is the indirect credit-boosting benefit of having
those bills always paid on time.
Indeed, there's little downside to such systems,
experts say, as long as a business owner keeps track of what's being
taken out of his account and when. Since the electronic transaction
information is encrypted, electronic payment industry officials
say computer hackers have caused no problems.
If you are interested in paying your company's
bills electronically, find out if the consumer-oriented companies
you pay regularly -- such as the electric and insurance company
-- have electronic payment systems. Many companies that have huge
customer bases offer such services. In most cases, the service is
free, since electronic payments carry lower overhead costs and save
the vendor money.
The business owner will need to give the vendor
his checking account information, and agree to a payment date. After
that, the bill amount is automatically deducted from the business's
account each month.
firms not convinced
Banks say they can supply electronic payment clients with a
paper trail, but the idea of doing business that way still lacks
appeal for some business owners.
Landmark Engineering and Surveying in Tampa,
Fla., is working on taking orders over the Internet, and employees
e-mail each other all the time. But making payments online is another
matter. Owner David Hurley says the idea of electronic payments
"makes me nervous. I just don't know I would feel comfortable without
the actual check in my hand.''
Yet, experts say, the only drawbacks to electronic
payments are that they often don't offer flexibility on the payment
date -- the electric company may say it has to take out your payment
on the 15th of each month -- and business owners have to be careful
if the bill amount fluctuates each month.
While it is not just the consumer-friendly companies
that offer electronic bill payment, they are generally the only
ones who do it for small customers. Direct business-to-business
payment systems are set up for giant companies doing millions of
dollars worth of business with a certain customer or vendor.
"Most of the companies using our services directly
are companies that we call hubs, extremely large companies like
General Motors or Johnson & Johnson," says Ruth Oehmig of Electronic
Data Systems Corp., an electronic payment provider in Plano,
your own system
But the small-business owner who wants to make electronic payments
is not dependent on a vendor's system. He can use his bank's Internet
system, or systems offered in conjunction with money management
computer software programs, such as Intuit's QuickBooks.
"These kinds of Internet payments are catching
on with small businesses, with more businesses paying vendors like
the package delivery company, the copier company -- companies they
do business with on a regular basis," says Anne Syslo, a product
manager for ACI
Worldwide of Omaha, Neb. ACI sells payment software to banks
Automated Clearing House Association in Herndon, Va., estimates
that business-to-business electronic payments are growing at the
rate of 18 percent a year. Last year, half of all electronic payments
were business-to-business transactions, says association spokesman
About 75 percent of the country's biggest banks
are offering electronic payment services for their customers, Syslo
estimates. Most offer a special Internet banking service for businesses
that is similar to the service they offer individuals. They include
of America, First
Manhattan, and Wells
In many cases, the bank system offers the user
choices on how to pay the bills: Everything from automatic payments
that resemble the debit systems of electric and phone companies
to an electronic system that can be used like a checkbook.
at big banks
The cost is fairly constant among the big banks. For instance,
First Union's business payment service is $19.95 a month, which
includes up to 20 bill payments a month. After that, each payment
costs 50 cents. At SunTrust,
the cost is $15.95 a month for 20 payments a month, and 75 cents
per transaction after that. And Bank of America, which has different
programs around the country, offers similarly priced services. For
example, its Florida customers pay $14.95 a month, which allows
them 20 payments. After that, the cost is 50 cents for each payment.
"You can't really compare the cost of electronic
payments to those associated with a regular checking account, because
the electronic service offers an entirely different platform for
the payments," says Gordon Turner, a spokesman for Bank of America
in Jacksonville, Fla. "You could obviously be charged less to pay
bills the old-fashioned way, so you have to decide if paying electronically
-- which assures that your bills get there on time -- is worth paying
Often, the first month's service is free, so
business owners can try it out to see if it's useful.
Of course, like anything else in the world of
business banking services, the fees can be negotiable, banking experts
say. For instance, if a bank is interested in getting your business,
you may be able to obtain its Internet banking services at a reduced
rate -- or even free.
"Much of the cost for a system will depend on
what type of paper trail you need to have related to the transactions,"
says John Cump of Phoenix-Hecht in Research Triangle Park, N.C.,
publisher of the Blue Book of Bank Prices. "The more paper
records required, the more the fees."
your bank's not connected
Most of the major banks are using payment services that work
through Intuit's QuickBooks software. Vicki Anderson, assistant
vice president in the Federal Reserve's retail payments office in
Miami, estimates there are 3,000 financial institutions offering
such services. Yet you might be doing business with a bank that
If your bank doesn't offer an Internet payment
system or you don't want to work through your bank for some reason,
consider working on your own with the QuickBooks software. A basic
system can cost as little as $9.95 a month for 20 payments. An extra
10 payments is available for $5.95. The QuickBooks Web
site offers more information about this option.
Anderson encourages small-business owners to
talk to their bank and see what types of electronic options are
available. Not only can a business owner make payments this way,
but he can also set up a system to receive payments electronically
by debiting customers' accounts.
In setting up an account, you must decide how
much control of the process you want to have. If you want the money
simply taken out by certain vendors, you can do that. But if your
cash flow is unpredictable, you may want to be able to use the system
like a checkbook since most debit systems lack the flexibility to
give you safeguards if a debit is going to put you in the red.
Kyle Parks is a freelance
writer based in Florida
-- Posted: June 21, 1999