Money transfers are one of the most common ways to make a person to person payment when you don’t have cash on-hand. But as a business tool, they’re not the safest or most secure way to make payments to your employees, contractors or vendors. Though you may relay on them from time-to-time in one-off situations, it’s important to consider why these aren’t a long term solution that you should rely on.
What are Money Transfers
Money transfers are a form of electronic fund transfers from one bank account to another. Sometimes also referred to as an Electronic Funds Transfer (EFTs), wire transfer, or e-Transfer, funds are transferred through an automated computer system and without the direct involvement of a payment processing company. Money transfers a common and simple way to send funds to friends, family or even your landlord on the spot – without having to withdraw cash or write a cheque. And while they’re good for simple person to person transactions, they’re not an ideal long term payment solution for businesses.
Record-Keeping and Taxes
Most money transfer systems don’t come with the option to save receipts or a dated history of previous money sends. Because of this, it can be hard to keep track of payments going in and out of your accounts without a dedicated manual entry system, which can be detrimental to both the business and their payees. When it comes to tax season, this can create even more confusion as contractors try to tally up their final income and tax numbers, and businesses try to reconcile who they paid and when. If a contractor requests a year-end payment summary for their own taxes, you may be left in a difficult situation.
Security is one of the most important aspects of paying and getting paid; it’s pivotal to keep personal data safe and secured in a way that mitigates the risk for theft or fraud. If you’re keeping your employee and vendors’ personal information stored within a money transfer system, or on paper to reference when need be, could put their information and your reputation at risk. Instead of risking a breach of confidentiality, it’s important to consider other systems that tokenize or encrypt this data so parties can get paid without fear of data breaches.
The process of sending a money transfer requires a fair bit of manual entry, when you consider the process of logging into a system, inputting payment information for the payee, confirming payment amounts and password and sending it through. This can be time consuming for a single money transfer, so if you’re making them regularly to more than one person, it can become overwhelming. And as your business grows and more employees or vendors need to be paid, its unlikely someone will want to dedicate their time to sending funds in this way.
For more information on payment types check out our article 3 Things You Should Consider When Choosing a Payment Processor.
The information in this article is provided solely for informational purposes and is not intended to be legal, business or other professional advice or an endorsement of any of the websites or services listed.