Do you know the most cost effective way for your business to pay vendor invoices?
There are many options for issuing payments to vendors; however, the fees involved need to be taken into consideration as over the course of a year it can impact your company’s bottom line.
In today’s electronic world, the options to make payments are plentiful. We will look at some of the more popular methods and the items to consider:
- Cash/debit cards are not the most convenient way for a business to pay vendors unless they are in the vendor’s business location. There are no fees associated with using cash, but debit cards can incur fees up to $1.50 per transaction depending on your financial institution. Furthermore, if you go into your line of credit or overdraft, there will be interest and overdraft fees.
- Cheques are still a popular method, albeit a slower one and could cost up to $1.50 per transaction. There is also the cost of printing and mailing cheques, as well as, the time involved in issuing cheques. One can understand why cheques are declining as the “go to” method.
- Credit cards are a convenient way to pay vendor invoices. There is no fee involved in paying invoices as long as the balance on your credit card is paid in full each month. If you have an outstanding balance with your credit card company, it could cost your business up to 21.5% in interest. Another perk of paying by credit card is collecting reward points if your card provider offers this service.
- Online banking is a safe and convenient way to pay invoices if your vendor is an eligible payee with your banking institution. Much quicker then issuing cheques, this method can be done 24/7 and you can even setup postdated payments so you never forget to pay an invoice on time. Individual transactions fees can range from $1.00-$1.50 each depending on your financial institution. Be sure not to go into your overdraft or line of credit or you will incur interest charges and overdraft fees.
- E-transfers are quickly gaining in popularity and is a secure way to move funds from one bank account to another. It requires only an email address or mobile phone number plus a Canadian bank account. No identifiable banking information is shared, making this a convenient way to pay vendors at only $1.50 per transaction.
Tax Technician, Gilmour Group CPA’s
Disclaimer: The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. While we have made every attempt to ensure the information contained in this article has been obtained from reliable sources and accurately described herein. SW Media Group and Gilmour Group Incorporated is not responsible for any errors or omissions, or for the results obtained from the use of this information. Before taking any action that might affect your personal and business finances, you should consult a qualified professional advisor.