Small Businesses Benefit From Digital Payments, Not Paper Checks

Digital payments aren’t just a helpful technological tool – recent data notes that they’re necessary for the success of small businesses, despite the preconceived notion that paper financials are safer.

Recent reports from Chase Bank, Goldman Sachs, and other financial institutions reveal that slow, inefficient payment methods (like keeping cash inside one’s business or using physical checks to pay employees) are holding back small businesses. Chase Bank’s State of Small Business Payments report shows that before the pandemic in 2019, 42% of transactions between small businesses were done by check rather than digital payments such as Zelle. On average, these checks cost small businesses ten times more than digital payments.

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These payment issues cause problems in a small business. Almost 40% of small business owners spend more than five hours a week dealing with payment issues, according to the Chase report. Specifically, microbusinesses (fewer than ten employees) have difficulty getting paid and paying their employees, with 70% of employees waiting anywhere from one to six months to get paid. Due to these late payments, 40% of small business owners are putting off hiring new employees, getting new inventory, or scheduling employees to work.

Experts don’t yet have a definitive answer as to why small business owners are resistant to leaving behind paper financials, particularly paper checks. Data from digital payment system Clover posited that small business owners are familiar with checks, don’t feel that digital payments fit in their budget, or assume that vendors or consumers won’t respond well to the change. However, the facts tell a different story; Deloitte suggests that digital payment platforms reduce manual administrative work by 68% and improve cash flow by 73% on average.

Digital payment systems can be anything from Zelle to Square POS to Venmo to Melio. These apps allow payments to be deposited immediately into employees’ accounts, along with payment tracking and scheduling. Some tools can even be used to pay one’s business bills with a credit card, so if business owners are having a slow month, vendors can be paid immediately while the business has time to manage their finances.