Business Preference for Checks
While electronic payments are often promoted for their speed and efficiency, survey data shows a substantial number of businesses still favor checks. Thirty percent of companies identify checks as their preferred method for supplier payments, with 34 percent using checks for at least half of their total disbursements. Only 10 percent of companies report using checks for fewer than 10 percent of their payments. These statistics reveal a persistent and broad use of checks across many sectors.
One significant reason behind the continued preference for checks is supplier demand. Suppliers often request or require check payments due to their own internal processes, existing infrastructure, or concerns about the costs associated with receiving digital payments. Meeting supplier preferences becomes essential for maintaining healthy business relationships and ensuring smooth transaction flows.
Control and Oversight Through Checks
Checks provide a level of manual control that some finance leaders find reassuring. In roles such as CFO or treasury manager, having direct oversight of payments can offer peace of mind. Dual-signature requirements and manual invoice review before issuing checks are seen as valuable safeguards against errors and unauthorized transactions.
These manual processes, while offering control, can be time-consuming and inefficient. Requiring executives to sign off on checks or review paper invoices introduces delays and adds administrative burden. As organizations scale, the inefficiencies of manual check processing become more pronounced, leading to increased labor costs and slowed operations.
Psychological Comfort of Checks
In times of economic uncertainty, checks provide a tangible method of payment that many companies associate with safety and predictability. The pandemic heightened this psychological inclination, as businesses sought familiar methods to retain control over their finances. Check float, the practice of leveraging the delay between check issuance and clearing, is another reason some companies prefer checks. By delaying cash outflows, businesses can temporarily improve liquidity and manage cash flow more conservatively.
While check float has become less reliable in an era of faster bank processing, some businesses continue to use it as a tactic in their financial strategy. This behavior further reinforces the place of checks in payment portfolios, even if the financial benefit is marginal.
Hidden Infrastructure Behind Check Use
Many businesses maintain the infrastructure required to support check payments. From dedicated printers and secure storage for check stock to accounting systems tailored for manual entries, these legacy systems create inertia. Replacing them with new solutions often requires significant investment in time, training, and capital. This makes the transition to digital payments less appealing for businesses that already operate within established frameworks.
Another challenge lies in integrating digital solutions across various departments. While accounts payable may be ready to automate, procurement or vendor management may still rely on processes designed around paper documentation. The misalignment between departments creates additional friction in moving away from checks.
Operational Implications of Manual Check Processes
Manually processing checks involves multiple steps, each with associated costs and potential for error. The typical workflow includes receiving invoices, routing them for approval, printing checks, collecting physical signatures, preparing envelopes, mailing checks, and reconciling accounts. Every step introduces an opportunity for delay, mistake, or added expense.
For example, delays in invoice approval can cause missed payment deadlines, damaging supplier relationships and leading to late fees or lost early-payment discounts. Manual data entry increases the risk of typographical errors, while physical mail delivery adds days to the transaction timeline. Reconciling check payments often requires additional labor, especially when matching payments to multiple invoices or handling vendor inquiries.
The resource-intensive nature of these workflows makes check processing one of the most expensive payment methods. Yet for companies that lack streamlined alternatives, these costs are accepted as a necessary part of doing business.
Supplier Relationship Considerations
Supplier satisfaction is critical to maintaining operational continuity. For this reason, businesses often accommodate their suppliers’ preferred payment methods. Some suppliers view checks as more secure or straightforward than digital alternatives. Others may lack the systems or knowledge to accept electronic payments.
Rather than alienate important vendors, companies continue issuing checks to ensure timely payments and avoid disputes. In some cases, checks offer clearer documentation for suppliers, simplifying their reconciliation process and providing a familiar audit trail.
Suppliers that deal with many small clients may also prefer checks because they can delay depositing them, thereby gaining greater control over their cash flow. This dynamic contributes to the ongoing use of checks across different types of supplier relationships.
Technological Solutions Supporting Check Continuity
While manual check processing has clear drawbacks, technology now offers ways to maintain the benefits of checks while mitigating their costs and inefficiencies. Modern accounts payable platforms can automate much of the check issuance process. Digital workflows allow invoice approvals to be completed electronically, maintaining control without paper. Payment statuses can be tracked in real time, reducing the need for manual follow-ups.
Some solutions also offer remote check signing, eliminating the need for executives to physically sign paper checks. Integration with accounting systems ensures that payments are accurately recorded without requiring duplicate entries. By adopting these technologies, companies can reduce the cost of using checks while preserving the oversight and flexibility they value.
Remote work environments have further accelerated the adoption of digital tools to support check processing. With fewer staff working onsite, businesses have turned to secure, cloud-based platforms to manage their payment workflows. These tools offer scalability, reliability, and compliance features that help finance teams remain effective even when distributed across locations.
Evolving Landscape of Corporate Payments
The financial industry continues to evolve, with an increasing emphasis on automation, speed, and integration. Yet this evolution does not mean that checks are obsolete. Instead, checks are being reimagined through the lens of modern technology. The focus is shifting from elimination to optimization.
Rather than force a one-size-fits-all solution, companies are now adopting hybrid approaches that allow them to balance supplier preferences, cost considerations, and operational control. This nuanced strategy recognizes the diverse needs of business partners and the complexities involved in financial workflows.
While digital payments will continue to gain traction, the goal should be to integrate checks into a broader, more efficient payment strategy. Checks can serve as one of many tools available to finance teams, deployed selectively based on context and need. This balanced approach ensures that companies retain flexibility while progressing toward greater efficiency.
Understanding Payment Strategy
To make informed decisions about payment methods, companies must consider not only transaction costs but also operational impacts, supplier relationships, and strategic priorities. Checks, despite their challenges, continue to offer value in specific circumstances. Recognizing this reality allows finance professionals to design payment strategies that reflect the full spectrum of business needs.
Understanding the true cost of checks is essential for optimizing their use. We will explore the detailed components of check processing costs and how technology and process improvements can reduce these expenses. By taking a closer look at the financial and operational burdens associated with checks, businesses can uncover opportunities to streamline payments without sacrificing control or supplier trust.
Navigating the True Cost of Check Processing
As businesses strive to manage costs and improve efficiency, payment processing often comes under scrutiny. Among the most debated methods is the use of paper checks. While checks offer familiarity and control, they are widely recognized as one of the more expensive options for making payments. What is often overlooked, however, is that much of this cost stems from outdated workflows and manual processes. We’ll explore the detailed components that make check processing expensive, and how businesses can reduce these costs without eliminating checks altogether.
Anatomy of Check Processing Costs
When analyzing the cost of processing checks, it is crucial to consider both direct and indirect expenses. Direct costs are straightforward and include materials like check stock, envelopes, paper, postage, and printing supplies. Indirect costs, however, are tied to labor, administrative overhead, and the time spent managing each transaction.
The full cost of processing a single check can vary widely depending on a company’s internal practices, but many studies have found it to be up to five times more expensive than electronic payments. This discrepancy highlights the need for businesses to identify and address the inefficiencies embedded in their payment systems.
Labor-Intensive Workflows
One of the most significant contributors to the high cost of check processing is the amount of manual labor required. From receiving invoices to printing and mailing checks, each step involves human intervention. Key stages in the process include:
- Reviewing and validating incoming invoices
- Routing invoices to multiple approvers
- Following up on delayed approvals
- Entering payment information into accounting systems
- Printing checks
- Securing physical signatures
- Preparing checks for mailing
- Answering vendor inquiries
- Reconciling payments with accounting records
Each of these steps consumes valuable time and resources. When scaled across hundreds or thousands of transactions, the labor costs alone can become substantial.
Material and Overhead Costs
The physical materials required for check processing also contribute to the total cost. Businesses must maintain supplies of check stock, envelopes, stamps, ink cartridges, and security paper. These recurring expenses may seem minor in isolation, but they accumulate quickly, especially in high-volume environments.
Beyond supplies, other overhead costs include maintaining dedicated equipment such as check printers, copiers, and secure storage for sensitive documents. The cumulative impact of these material and equipment costs can be a drain on financial and operational resources.
Delays and Lost Discounts
Manual processes often lead to delays in payment approval and issuance. These delays can result in missed opportunities for early payment discounts, late payment fees, and strained vendor relationships. In some industries, taking advantage of early payment terms can generate substantial savings. However, this benefit is frequently lost due to inefficient approval chains or communication breakdowns.
Timely invoice processing and payment approval are critical to maximizing these opportunities. When relying on paper-based systems, businesses struggle to maintain the speed and accuracy needed to take full advantage of favorable payment terms.
Compliance and Risk Costs
While the previous part highlighted the risks associated with check fraud, it’s important to understand how these risks translate into additional costs. Implementing fraud controls—such as positive pay, dual signatures, and segregated duties—requires time and staffing. While necessary, these measures also increase operational costs.
In addition, compliance with internal controls, audit requirements, and regulatory standards introduces another layer of complexity. Organizations must maintain accurate documentation and audit trails, which are often paper-based in check-centric processes. Storing, organizing, and retrieving these documents requires additional administrative labor and storage space.
Communication and Vendor Management
When vendors have questions about payments, checks tend to generate more inquiries than electronic methods. Suppliers may call to confirm receipt, inquire about delays, or request tracking details. Each of these inquiries requires a response, diverting time from finance or AP staff who must locate the information manually.
Over time, these communication tasks contribute to the indirect cost of check processing. Automated payment methods typically reduce the volume of such inquiries by providing real-time updates and status notifications. Companies relying on checks often find themselves spending more time and resources managing these vendor interactions.
Opportunities for Cost Reduction
While the costs associated with checks are substantial, there are several strategies companies can implement to reduce expenses. The goal is not necessarily to eliminate checks, but to make the process more efficient through selective automation and smart outsourcing.
One of the most effective changes a company can make is to digitize the invoice approval workflow. Electronic routing of invoices to approvers ensures timely action, provides visibility into bottlenecks, and allows finance teams to track the status of every payment in real time. Digital approval platforms often include automated reminders to approvers, helping to maintain payment schedules and avoid costly delays.
Outsourcing Physical Check Issuance
Another strategy involves outsourcing the printing and mailing of checks to third-party providers. These providers specialize in high-volume payment processing and can often complete the task at a fraction of the internal cost. By outsourcing this part of the process, companies eliminate the need to manage check stock, postage, printers, and secure handling of paper payments.
Outsourcing also introduces consistency and standardization, reducing the likelihood of errors and enhancing overall payment accuracy. In some cases, outsourced providers can even deliver enhanced security features and fraud protection as part of their services.
Integrating with Accounting Systems
Automated check processing solutions that integrate directly with accounting platforms help reduce the time spent on data entry and reconciliation. By syncing payment data across systems, businesses can ensure accurate financial reporting and streamline their month-end close processes.
This integration also simplifies audit preparation, as it creates a digital trail of each payment decision, approval, and transaction. When auditors request supporting documentation, finance teams can retrieve it in seconds, reducing the burden on staff and minimizing disruption to daily operations.
Implementing Digital Controls
One of the traditional arguments in favor of checks is the control they offer. However, modern technology now provides equivalent or superior control mechanisms in digital formats. Digital workflows can be configured to require multiple levels of approval, enforce dollar thresholds for review, and flag unusual transactions for further scrutiny.
These controls can be maintained in digital payment platforms, removing the need for physical intervention while still maintaining financial oversight. In fact, digital controls often offer better documentation and transparency than their paper-based counterparts.
Addressing Change Management Challenges
While the benefits of automation and process improvement are clear, implementing these changes can be challenging. Finance leaders must overcome internal resistance to change, align multiple departments, and ensure staff are adequately trained. Transitioning from a manual to an automated payment environment requires careful planning, strong leadership, and cross-functional collaboration.
Key to this transition is clear communication about the benefits. When employees understand how automation reduces their workload, improves accuracy, and enhances job satisfaction, they are more likely to embrace the changes. Providing training and support throughout the transition also builds confidence and competence.
Balancing Cost Savings with Business Needs
While reducing costs is important, it should not come at the expense of supplier relationships or operational stability. Many businesses adopt a hybrid approach, using digital payments where appropriate while retaining checks for certain transactions. This balanced strategy allows organizations to manage costs effectively while meeting the diverse needs of their vendors.
Hybrid strategies can also serve as transitional models for companies that plan to phase out checks over time. By gradually shifting specific payment categories to electronic formats, businesses can maintain continuity while making meaningful progress toward cost savings.
Measuring Return on Investment
To evaluate the effectiveness of cost-reduction strategies, companies should track key performance indicators such as cost per payment, approval cycle times, vendor inquiry rates, and discount capture rates. These metrics provide valuable insights into process efficiency and highlight areas for further improvement.
Regularly reviewing these metrics enables finance teams to make data-driven decisions, refine their workflows, and continue optimizing payment operations. It also provides a foundation for justifying technology investments to executive leadership by demonstrating tangible financial benefits.
Building a Long-Term Payment Strategy
Ultimately, reducing the cost of check processing is not a one-time project but a component of a broader payment strategy. By addressing inefficiencies, leveraging technology, and adapting to vendor needs, companies can create a payment environment that is cost-effective, secure, and scalable.
This strategy must be reviewed regularly to ensure it evolves alongside the business. As new payment technologies emerge and industry standards shift, finance teams must remain proactive in identifying opportunities to improve. A flexible, adaptive approach ensures that companies are prepared to meet the changing demands of their suppliers, partners, and regulators.
Managing Check-Related Risks with Modern Controls
While checks remain a preferred payment method for many businesses, they are not without their vulnerabilities. Among the most pressing concerns are risks associated with fraud, internal control breakdowns, and operational inefficiencies. These risks can have both financial and reputational consequences. Understanding and mitigating these exposures is essential for organizations that continue to use checks as part of their payment strategy.
We will explore the most common risks tied to check payments and examine practical ways to manage them using updated practices and technologies. By integrating fraud prevention strategies and reinforcing internal controls, companies can minimize their exposure without abandoning checks altogether.
Prevalence of Check Fraud
Checks remain one of the most targeted payment methods for fraudsters. Unlike digital transactions, which are encrypted and tracked in real-time, checks offer physical access points for tampering and forgery. Their reliance on manual processing and human handling increases the likelihood of interception or alteration.
Industry surveys consistently report high instances of check fraud. A significant number of companies report having been victims of check-related fraud attempts. These threats span from forged signatures and altered payee names to sophisticated internal schemes involving collusion and embezzlement.
Given this risk landscape, it’s clear that relying on outdated methods without implementing strong safeguards is no longer a sustainable option.
Categories of Check Risk Exposure
Check payment risks generally fall into three categories: people, processes, and technology. Each category presents unique challenges and requires specific mitigation strategies.
- People’s risks include employee fraud, collusion, lack of training, and inadequate supervision. Without proper education and oversight, staff can unintentionally enable fraud or deliberately exploit weak controls.
- Process risks involve outdated approval workflows, unclear responsibilities, lack of segregation of duties, and paper-based bottlenecks. Manual procedures are prone to human error and reduce visibility across the payment cycle.
- Technology risks stem from the lack of secure tools, weak integration with accounting systems, and inadequate monitoring. Without digital safeguards, checks are vulnerable to unauthorized duplication, data loss, and delayed fraud detection.
Enhancing Internal Controls
A strong internal control environment is the first line of defense against check fraud. Businesses must establish clear protocols for every step of the check issuance process, from invoice approval to reconciliation.
Effective control measures include:
- Enforcing dual authorization for checks above a designated threshold
- Separating duties across invoice approval, check preparation, and check signing
- Maintaining a log or digital audit trail of all payment approvals
- Requiring supervisor review of all manual adjustments or overrides
- Conducting random audits of check transactions
These practices help to deter fraud by reducing opportunities for unauthorized behavior and improving accountability.
Utilizing Positive Pay Services
Positive pay is one of the most effective services available for check fraud prevention. This service allows companies to submit a list of issued checks to their bank, which is then cross-referenced against incoming checks for payment. Only matches are cleared, while mismatches are flagged for manual review.
This extra layer of verification significantly reduces the risk of altered or counterfeit checks being processed. By reconciling check details in real time, positive pay helps organizations catch fraudulent attempts before funds are withdrawn.
Some financial institutions also offer reverse positive pay, where the bank sends a list of presented checks to the business for review. This adds a similar layer of control but places the verification responsibility on the payer.
Protecting Physical Check Stock
Another often-overlooked area of risk is the physical security of check stock. If blank checks fall into the wrong hands, they can be easily misused. Companies must secure check stock in locked cabinets or safes with restricted access.
Additional safety measures include:
- Using check stock with built-in security features, such as watermarks, microprinting, and holograms
- Maintaining an inventory log of all check stock received, issued, and destroyed
- Limiting access to check printing equipment to authorized personnel
- Monitoring usage with camera surveillance in print rooms if needed
These precautions help prevent internal and external threats from exploiting physical check assets.
Educating Staff on Fraud Risks
Employee education is a critical element of any risk management strategy. Staff should be trained to recognize common fraud schemes, understand internal control protocols, and follow proper procedures for issuing and approving checks.
Training should include:
- Recognizing signs of check tampering or alteration
- Understanding the importance of segregation of duties
- Using systems securely and avoiding sharing login credentials
- Reporting suspicious activity through secure channels
Ongoing training programs help ensure that employees remain alert to evolving fraud tactics and understand their role in maintaining secure payment processes.
Daily Reconciliation and Monitoring
Timely reconciliation of bank accounts helps organizations detect fraudulent or unauthorized activity early. Companies should aim to reconcile their accounts daily or at least multiple times per week.
Automated reconciliation tools can assist in matching checks issued to checks cleared. Any discrepancies—such as checks posted with altered amounts, duplicate checks, or out-of-sequence checks—should be investigated immediately.
Real-time transaction monitoring also enables companies to flag unusual patterns, such as sudden increases in check volume or repetitive payments to the same vendor. Early detection is essential for minimizing financial losses and restoring integrity to payment systems.
Segregating Bank Accounts
Segregating funds across multiple bank accounts can help contain risk in the event of check fraud. By dedicating specific accounts to certain types of payments—such as payroll, vendor payments, or refunds—companies can isolate risk and reduce exposure.
In some cases, businesses create a separate disbursement account used exclusively for check payments. This account is funded only with the amount required for daily payments, minimizing the balance available for fraudulent withdrawal.
Implementing account restrictions such as “post no checks” on deposit accounts or requiring dual authorization for fund transfers further reinforces this layered approach to risk mitigation.
Leveraging Digital Controls for Paper Payments
Although checks are physical instruments, many of the surrounding processes can be digitized. Companies can maintain digital approval workflows, track audit trails electronically, and enforce financial controls through integrated systems.
By digitizing these elements, organizations gain transparency and the ability to review payment histories without sorting through physical documents. This improves audit readiness and strengthens compliance.
Key digital control practices include:
- Automated invoice routing and approval
- Email or dashboard alerts for high-value payments
- Real-time visibility into payment status
- Centralized document storage and retrieval
Even when payments end in a physical check, having digital infrastructure around them improves control and reduces risk.
Building a Fraud Response Plan
Despite the best precautions, no system is completely immune to fraud. Businesses must have a clear plan in place for how to respond if check fraud is discovered. A swift, coordinated response can limit damage and demonstrate control to regulators and auditors.
A typical fraud response plan should include:
- Immediate notification of the bank to stop or recall the payment
- Internal investigation procedures to determine the source of the breach
- Temporary suspension of check payments until security is verified
- Legal review and preparation for potential reporting obligations
- Communication protocols for stakeholders and affected parties
Having this plan documented and tested helps ensure that teams are ready to act decisively in a crisis.
Keeping Up with Evolving Fraud Techniques
Check fraud tactics continue to evolve. Criminals adapt quickly to changes in technology, often using social engineering, phishing, and insider collusion to bypass safeguards. Organizations must stay informed about new threats and regularly update their defenses.
Staying current includes:
- Subscribing to fraud alerts and industry bulletins
- Participating in industry forums or working groups focused on payment security
- Conducting periodic internal audits and fraud risk assessments
- Evaluating the effectiveness of current controls and adjusting as needed
This proactive mindset ensures that risk mitigation strategies remain aligned with current threats.
Balancing Security and Usability
Implementing robust controls must be balanced with usability. If processes are too restrictive, employees may attempt to bypass them, creating new vulnerabilities. The key is to embed security into workflows in a way that enhances, rather than hinders, operational efficiency.
For example, using automated alerts instead of requiring physical signatures on every check can achieve the same control objective with less effort. Providing users with role-based access ensures accountability without burdening them with irrelevant tasks. The goal is to create a culture where security is part of everyday business practices rather than a separate or burdensome task.
Creating a Culture of Accountability
Risk management is most effective when supported by a culture of accountability. Employees at all levels must understand their roles in protecting company resources. This includes adhering to protocols, reporting anomalies, and supporting audit activities.
Leadership plays a vital role in setting expectations and modeling ethical behavior. Regular communication from senior management about the importance of financial integrity reinforces the seriousness of fraud prevention. When accountability is embedded in company values, employees are more likely to report concerns, follow procedures, and support continuous improvement efforts.
Future-Proofing Risk Mitigation Strategies
As business environments grow more complex, payment security must evolve accordingly. Organizations should design their risk mitigation strategies to be adaptable, scalable, and resilient. This includes investing in flexible systems, revisiting risk assessments regularly, and maintaining readiness for new threats.
Future-proofing risk management means not only responding to today’s challenges but also preparing for what’s next. As check volumes fluctuate and digital payment methods continue to rise, companies must ensure their controls are ready to evolve alongside them. In the ever-changing landscape of payment security, vigilance, adaptability, and proactive leadership are the most valuable tools a business can have.
Conclusion
Despite years of pressure to phase out check payments in favor of faster, cheaper digital alternatives, checks have proven their staying power in modern finance. As explored across this series, many companies continue to rely on checks due to factors like supplier preference, internal control traditions, and perceived security. While the cost and risk associated with checks are higher compared to ACH or card-based payments, these challenges can be mitigated through the strategic use of technology, refined processes, and robust risk management practices.
The persistent role of checks in the business world, emphasizing that checks are not inherently inefficient but often become so when organizations fail to modernize surrounding processes. We explored how evolving technology can streamline check processing, reduce costs, and allow for more intelligent control without sacrificing familiarity or flexibility. Addressed the security challenges checks present and offered actionable risk management strategies, including fraud detection tools, employee education, internal controls, and response planning.
The reality is that payment optimization is not about eliminating one payment type in favor of another; it’s about creating a framework that is secure, cost-effective, and responsive to both internal needs and external partner preferences. For many businesses, that means continuing to use checks—strategically and selectively—within a diversified payment portfolio.
Moving forward, the goal should not be to force a singular payment method but to empower businesses with knowledge, tools, and choices. By embracing a balanced approach and continually refining check processes alongside other payment innovations, organizations can confidently manage costs, preserve valuable supplier relationships, and safeguard against risk—proving that checks, when used wisely, are far from obsolete.
