By Rieva Lesonsky
Are you looking for ways to simplify your life, streamline your small business and keep your employees happy at the same time? Then one option you should consider is using direct deposit for payroll.
A recent survey by NACHA — The Electronic Payments Association found some surprising news: 48 percent of small business owners do not use direct deposit for payroll. That can be a big mistake, because direct deposit is an easy way for your small business to save thousands of dollars, increase your employees’ satisfaction and reduce your business’s impact on the environment each year.
The top 10 industries that NACHA found are least likely to use direct deposit includes many typically small businesses: Repair and maintenance services (plumbing, pest control, etc.); food services (deli, fast food, restaurants); personal care services (hair, nail, spa); retail (all types); construction; wholesale trade; arts / entertainment; real estate sales / rental / leasing; agriculture / fishing / mining; transportation.
The survey additionally reveals:
- Even as small businesses get bigger, many of them still don’t use direct deposit. Eighteen percent of small businesses with revenue between $10 million and $20 million still do not use direct deposit.
- Businesses where less than 75 percent of workers are salaried are less likely to use direct deposit.
- Small businesses that don’t use direct deposit waste a lot of time. One-fifth of small business owners who don’t use direct deposit in their business visit their financial institution 15 or more times per month.
Direct deposit isn’t just for your employees—you can also use it to pay vendors. According to the NACHA survey, small businesses pay an average of 96 vendors by check each month. Switching these to direct payment could save the average business thousands of dollars annually when the cost of cutting and processing checks as well as employee work time is taken into account.
Here’s how the savings from direct deposit breaks down:
- It costs a business up to $2 to cut and process a hard-copy check vs. $.35 or less for direct deposit.
- A business with 25 employees would save at least $2,000 a year. A business with 100 employees would save at least $7,000.
Of course, there’s also the savings in terms of printer ink, paper and envelopes that you won’t be mailing. NACHA and PayItGreen have created a simple calculator that helps you determine your carbon footprint savings of switching to direct deposit:
Many employees expect direct deposit these days—and offering them this convenience is one way your small business can compete with bigger employers.
My company uses direct deposit; we wouldn’t have it any other way. Switching over is simple—just talk to your banker or financial institution.
Image by Flickr user leafbug (Creative Commons)
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