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Uncover the real cost of writing checks.

Entrepreneurs wear many hats each day, a weight that can be hard to shoulder. If you’re still using paper payroll checks, there’s an easy way to lighten your workload: try a direct deposit service. You’ll not only save time and money, you can also help protect your business, employee information and even the environment.

You’re not alone if you’re still writing checks. According to the Society for Human Resource Management, 48 percent of small businesses did not use direct deposit for payroll in 2011. Smaller businesses with more transient workers, such as construction and maintenance contractors, retailers and personal care services, were even less likely to use direct deposit.

Here are 5 compelling reasons to have your financial institution (or a reputable third-party payroll provider) electronically manage deposits:

  1. Avoid IRS penalties: It’s every business owner’s responsibility to send timely payroll taxes to the IRS to cover Social Security, Medicare and unemployment insurance for each employee. According to, millions of businesses — a whopping 6.8 million — did not do this task correctly in 2013, and incurred $4.5 billion in IRS penalties.You may ask why this happens so frequently. Rules for payroll taxes can change as a business grows and hires different types of employees (e.g., contractor, full-time, part-time, hourly), and it’s hard for a time-stretched entrepreneur to keep up with new IRS regulations.A direct deposit service from your financial institution or a reputable third-party payroll provider can eliminate the cost and hassle of receiving an IRS penalty. For example, BMO Harris’ Business Online Payroll Service automatically provides you with federal, state and local payroll taxes and filings plus HR tools and resources to help you comply with regulations.

  2. Reduce fraud and increase confidentiality: Paper checks contain your bank account number, routing number, and the name and address of your business. Any thief, forger or dishonest employee could use that information to gain unauthorized access to your account. You would then have to freeze your account, open a new one and maybe even absorb any resulting losses, depending on your state’s liability laws. Direct deposit transactions are safe and secure, according to and the U.S. Treasury and Federal Reserve Bank. Your business information remains confidential in the hands of your financial institution or payroll provider, shielding you and your employees from identity and business theft.
  3. Save time and money: Even if you have just a few employees, direct deposit will save you valuable time spent on administration, error resolution and bank visits, plus the cost of printing commercial checks. Your time is better spent on improving your operation and advancing your core business proposition. These hard and soft costs can really add up. A Dun & Bradstreet article cited these estimated out-of-pocket costs from the Electronic Payment Association:

    Paper Check Processing Cost
    Average cost/check: $2

    Average cost for 20 employees:
    $40/biweekly pay period

    Average annual cost for 20 employees:

    Direct Deposit Cost
    Average cost/employee: $.35

    Average cost for 20 employees:
    $7/biweekly pay period

    Average annual cost for 20 employees:

    You cannot be in control of a business if you don’t know what is going on. With direct deposit, you can view transactions and catch errors 24/7, without waiting for your employees to visit their banks to cash or deposit their checks and wait for them to clear.

  4. Employee morale: The automatic nature of direct deposit benefits your employees, as well as you. With ready access to their salaries at the start of business on payday (or sometimes even the day before), direct deposit affords employees 24/7 access to their money and the ability to assign different percentages of their salary into several accounts, such as savings and IRAs. These are real-time savings and convenience benefits that can translate into happier, more productive employees.

  5. Environmentally friendly: As with all electronic processes, direct deposit is paperless and reduces the environmental impact of your business. You can use the environmental calculator at to see just how much using direct deposit will decrease your footprint.Once you make the switch to direct deposit, you’ll want to add a direct payable service. Your suppliers will thank you.

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