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Forget March Madness: It’s Checks That Are Costing Businesses
Every year, executive outplacement firm Challenger, Gray, & Christmas release their “March Madness Report,” which projects the financial losses employers will suffer as a result of employees watching the NCAA March Madness tournament. This year, the firm stated that with 50 million Americans participating in March Madness office pools, companies could stand to lose at least $1.2 billion for every unproductive work hour during the first week of the tournament.
The accuracy of the report is much debated, but employers do get concerned with the losses they might incur throughout March. Some companies put up firewalls or slow down streaming capabilities, while others instill an outright ban. What most businesses don’t realize is that while they are worrying about productivity lulls because of a basketball tournament, a massive time and cost waste is hiding in plain sight: writing checks.
While checks have vastly decreased among consumers, they are, in fact, still the dominant payment vehicle for businesses. According to the most recent AFP report, small to mid-size businesses still rely on paper checks for 60% of their transactions.
Every year, B2B checks cost businesses a staggering $25 Billion per year. For an example, take a company that makes 200 payments per month. Factoring in both time and materials, the average cost of a check is around $16. That’s an $3,200 monthly cost and a $38,400 annual cost. Check fraud is also rampant– out of $1.7 billion debit account fraud annually, roughly $800M is the direct result of check fraud. And 87 percent of financial professionals report that their companies have fallen victim to check fraud. Considering both hard and soft costs, as well as the security risks, one would wonder why businesses still continue to write checks.
The answer is simple: it’s easy to do what you’ve always done. Companies are used to printing checks, hounding department heads for invoice approvals, and making their CFO sign a stack of paper checks each month. It’s a manual, risky, and error-prone process, but sometimes familiarity trumps change. But is it worth the risk and expense? Even Warren Buffet would agree that modernizing your payments process is a better bet than a perfect bracket.
Rather than locking down the firewall and adding policies to make sure employees aren’t streaming live NCAA video, why not put that same effort into ditching paper checks and increasing security? Because let’s face it: employees will just watch the games on their phones anyway.
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