Today’s banking services are less expensive in the past but banks’ revenues are actually greater today. Why? Banks add extra fees for add-on services that can be avoided but only with proper management oversight.
For example, most of the nation’s bill payment processors charge a hefty fee for cancelling and replacing a lost check. Many of my small business clients, for example, pay $30 or more on a typical month in bank fees for this unnecessary expense. They pay far more than that in lost time and productivity in wasted officer and bookkeeper time even if they don’t see that amount on their bank statements. Here are four simple practices to save time and money:
- Encourage all vendors to use electronic payment services. It is fast, free (or really cheap), safe and highly reliable. It provides an end-to-end trace and automated communications on the payment process.
- Have a setup fee built into your work agreement for a new vendor who requires cash or paper check payment. Use that fee to pay your bookkeeper for the extra work to verify the contact information, address and tax identification number.
- Also include a fee for cancellation and replacement of a paper payment in your work agreement. (I include a sample work agreement online with an “Additional Fees” section that details all of the possible extra fees triggered by unplanned client actions).
- Do not cancel lost checks. Simply allow lost checks to expire; usually at 90 days. This triggers no fee. If you use a bill payment system they will confirm the payment cancellation at no charge. Just include a note about the payent replacement in the memo of the replacement payment. (In the past I wrote about one bank small business bill payment system that did not do this but haven’t received any problem reports of this in recent years). Bill.com recently raised its check cancellation and replacement fees but confirmed in writing that no fee applies to expired checks.
This is one more area where designing and implementing thoughtful small business management practices can reduce in beeter net financial results.