If you’re a small business owner, you’re probably looking for ways to cut costs and operate more efficiently. One easy change you can make is using direct deposit for your payroll.
In the United States, most employers pay their staff via direct deposit, which electronically transfers funds from your payroll account directly into your employees’ bank accounts.
If you don’t already use direct deposit, here are some benefits to keep in mind if you’re thinking about making that change.
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Save Yourself Some Money
Printing checks for employees when payday comes around costs more than you think. This number can add up month after month.
Sure, it might sound like just a few pieces of paper, but what if you need to reprint a lost check or adjust a bank error? Also, if you’re a small business, printing fewer checks at once actually increases the price per check.
Switching to direct deposit can mean big savings for your company as it reduces the cost of paying employees and businesses of all sizes can take advantage of these reductions.
Smaller companies with up to 100 employees can save as much as $19,000 annually by using direct deposit. Meanwhile, larger firms with more than 30,000 employees reduce their payroll costs by more than $5.7 million each year when they make this change.
Even if you fall on the lower end of this range, you’re still saving a significant chunk of change, which can be put back into other areas of your business.
Save Yourself Some Time
Think about how much time it takes to have checks printed every two weeks – or every week, depending on how frequently you pay your employees. Then, once they’re printed, you need to proofread them, sign them, put them in envelopes, address the envelopes and either mail them or hand them out.
How much employee time is spent on this one task? Probably more than you even realize.
Direct deposit significantly reduces the amount of staff time required to do payroll. By eliminating this manual preparation of paychecks, these staff hours can be focused elsewhere.
Payday Truly Means Payday
The days of employees depositing a physical check at their bank and waiting for a hold of several days to clear before the funds are available are long gone. There is no quicker way to pay your staff than through direct deposit.
Through direct deposit, funds clear instantly and will be deposited automatically into your employees’ accounts on payday.
And if your regular payday falls on a holiday, it’s easy for you to work with your bank’s schedule and ensure your employees are paid in advance, so there’s no disruption in pay.
As a business, adopting direct deposit is more convenient than distributing checks to employees and waiting for them to be cashed.
Bookkeeping Made Easy
The immediate nature of direct deposits reduces your company’s bookkeeping needs. Since funds are immediately dispersed to your employees’ banks, eliminating the waiting period for checks to cash, there are fewer opportunities to hold up your accounts and your bookkeeping practices.
Plus, direct deposit programs generate online transaction reports that make it easy to manage and maintain your files. And in addition to payrole software, there are other tools available from electronic timeclocks to a free paystub generator.
Direct deposit is more secure than paper checks. By opting for direct deposit, you’re reducing the odds of lost or stolen checks as well as check fraud risk.
Since everything is done electronically, there are fewer eyes on your sensitive financial information and your employees’ personal data.
That’s not to say there are no risks with direct deposits. These issues are usually caused by human error, though, such as writing down an incorrect bank routing or account number. These mistakes can usually be easily fixed.
Your Employees Will Be Happier Using Direct Deposit
There are many reasons why your employees will likely prefer direct deposit.
In this modern world, most banking is done online. This makes a direct deposit more convenient for them than receiving payments by check or any other means.
Employees also benefit from the immediate availability of their funds and appreciate no longer needing to wait for checks to clear. That money will be right at their fingertips on payday. They can easily access the funds through their bank debit card or checkbook.
Through direct deposit, employees also have more control over how their paychecks are distributed and can opt to have the funds allocated into different accounts, such as checking, savings or retirement funds.
Many banks also offer incentives to individuals, such as a free checking account, for signing up with direct deposit.
The Eco-friendly Choice
In addition to the time and money companies can save, using direct deposit also has a positive impact on the environment. Reducing the number of checks printed can decrease a business’s carbon footprint.
Businesses that employ more than 300 people and issue paychecks every two weeks can save 121 pounds of paper each pay period by using direct deposit. This also eliminates the release of 346 pounds of greenhouse gases into the atmosphere during this timeframe and saves 1,159 gallons of wastewater.
The Smart Choice
Though paper checks once ruled the roost, today, most of the American workforce – about 93% – are paid using direct deposit.
For the businesses holding out, reluctant to make that change, there are numerous technological tools available to make the switch to direct deposit a seamless one.
Once you see how easy it is, you won’t regret moving your payroll to direct deposit. As a business owner, it’s a smart move, one that saves you time, money and energy, and also benefits your staff.