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EzCheck True Cost of Checks

When the Merchant is NOT using a check service

If you have tried and failed at selling check services to a business that currently does not use a check service, you are not alone.  Most of the time the decision maker compares his annual (or monthly) write-offs from check losses to the annual (or monthly) fee for the check service and says, “No, your service costs more than I write off in checks.”

But the business’ true cost of accepting checks is more than just the write-offs of bad checks that they were unable to collect themselves.  Below are a few other costs that need to be added to write-offs to help the decision-maker understand his true cost of accepting checks on his own.

RETURNS
  1. Write offs
  2. Collection costs prior to write offs
    • Wages, commissions, and other labor costs of the collectors
    • Postage and mailer costs
    • Telephone costs
    • Costs of outsourced collection agencies
    • Electronic representment costs
    • Lost productive time of the person trying to collect checks instead of running their business
  3. Administrative costs to receive and process returns
    • Time receiving and accounting for each item
    • Returned check fees from bank
    • Impact on cash flow/account balance from each return

 LOST SALES (due to in-house check acceptance policy)
  1. Lost sales due to a restrictive check acceptance policy using any of the following criteria:
    • Low-numbered checks
    • High-dollar checks
    • Out-of-area checks
    • Checks from unknown check writers
    • Any other merchant-specific check restrictions
  2. Lost sales due to a check writer whose check was not accepted not returning for repeat purchases.
  3. Lost sales from new customers drawn in by expensive advertising but then turned down by a restrictive in-house policy.
  4. Lost sales due to employees interpreting the in-house check acceptance policy inconsistently or incorrectly.
  5. Lost sales due to the in-house check acceptance policy requiring manager approval and slowing down the check out process thus frustrating customers.

 BANK FEES (eliminated or reduced if using Electronic Check Transfer)
  1. Returned Check Fees (range from $3.00 to $20.00 per item)
  2. Per Check Deposit Fees (range from $0.03 to $0.10 per item)
  3. Deposit Slip Fees (range from $0.45 to $0.75 per item)
  4. Encoding or Reject Fees (range from $0.03 to $0.10 per item)

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