Paper Checks for Global B2B Payments

Payment Method Guide

Paper checks (paper cheques) are physical documents that instruct a bank to transfer a specific amount from the bank account of one party (the drawer) to another party (the payee). The payee can then cash the check or deposit it directly into their own bank account.

Funds are not withdrawn until the drawer’s bank receives the check, determines that the drawer has money in their account, and releases the amount to the payee. Usually, a central entity, acts as a medium for all the various banks to process these payments. In the United States, the Automated Clearing House (ACH) provides a cross-bank transfer network to clear and settle paper checks. It does so in batches, which can require several days for payments to clear each bank. The drawer must have funds available for the bank to release payment.

Because of the nature of mail, the paper check transaction process can take several days. Also, payments cannot be readily traced unless the whereabouts of the physical check are known.

To manually execute a high volume of paper checks, banks may offer print check services where payments can be uploaded to the transmitting bank. Another option is to print checks in house and mail them to payees directly.

• “paper cheques”

• “bank draft”

• Familiar form factor

• “Delays” remittance / clearance

• No direct transaction fee

• Postal / mail service involvement

• Cost and workload for physical printing and mailing

• Lack of traceability

• International mail issues

• Multiple points of failure

• Challenging reconciliation processes

• High fraud risk

Requires mailing address for payee / beneficiary (formats vary depending on country).

Best Use Case for Paper Checks

Paper checks are best used with a payee who is unable or unwilling to provide bank routing information or other means of payment and primarily only a mailing address is available. It is also ideal for payees that are cost conscious and do not require funds immediately. In some countries, electronic forms of payment are not acceptable or are a poor cultural fit, so paper checks are used for remittance.

Worst Use Case for Paper Checks

Paper checks are not a good choice If the payee doesn’t have a means to cash the check (e.g. a bank account or a third-party cash service). Additionally, paying with paper checks is suboptimal in countries where postal privacy, efficiency, and security are problems that may cause the check to be stolen or go missing. Most corporate AP departments want to reduce or eliminate check payments because of their high labor costs and inefficiencies and the risk of fraud they can introduce.

How Tipalti Works with Paper Checks

When payees select paper checks during the onboarding process as their chosen method of payment, Tipalti ensures they provided a suitable postal address. This reduces the risk that payments will be rejected due to incorrect information.  Tipalti also offers the payee to choose certain payment thresholds so they can decide when a paper check is sent. Payers can also determine how much or if any fees related to the production and mailing of the check are passed to the payee.

To streamline bank communications, Tipalti directs all payments at once through various payment method interfaces. The payer does not have to directly communicate with the bank(s) or access any banking portals check printing and fulfillment. Checks are drafted from Tipalti’s managed account, but branded as the payer’s company. To prevent overdraft, only adequately funded accounts will produce a check. As a courtesy, an email is sent to the payee indicating that payment has been sent and whom it was sent to. To ensure that the check matches the designated amount and payee, Tipalti offers Positive Pay features to reduce fraud.

Should issues arise (such as a returned check), Tipalti reports the error and sends a new message to the payee. If the payee can correct the condition, they are automatically sent a branded email on behalf of the payer with information for remedying the situation.

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