EFS1 Photo: EFS
Electronic funds source checks are but one method for moving away from paper-based money transfers.

Alternatives to paper checks

Electronic forms of payment can put money in a driver’s wallet a whole lot faster.

By Jeremy Robison, president, Tetra Capital

The trucking industry is going digital across many aspects of its business, including how it moves money around. In this guest column, Jeremy Robison, president of Tetra Capital, an independent freight bill factoring company, explains that this should encourage motor carriers large and small to find alternatives to using paper checks.

Do you hate paper checks? If you do, you are not alone. According to the PYMNTS Disbursement Satisfaction Index survey compiled by PYMNTS.com and Ingo Money late last year, checks ranked 4.4 out of 100 in terms of preferred payment methods among consumers – the lowest score of any disbursement method, even though 22 billion checks representing $22 trillion in value are disbursed every year, according to the U.S. Federal Reserve.

The average “disbursement index score” across all use cases and payment methods hit 52.8 with consumer satisfaction highest for direct deposit, followed by instant credit pushed to a card (71.9), cash (67.1) and non-instant credit pushed to a card (48.3).

While those metrics reflects the views of consumers, there are more than a few reasons why businesses, in general, should feel the same way about checks.

From security issues and the risk of lost checks to the delay in receiving them on a good day – not to mention possible delays because of holidays, storms or natural disasters – using paper checks can be a challenge for motor carriers and truck drivers, especially, who are on the road for extended periods of time and don’t have access to receiving mail on a regular basis. There are also those drivers who live out of their trucks without a physical address to which checks can be mailed to.

Then when you factor in not having control over a check bouncing and ending up debiting out of your account, or with banks withholding funds from the check until it “clears,” there seems like there should be better ways to receive payments.

Luckily for trucking companies, there are various payment options available that avoid paper checks – some more common than others, with each offering pluses and minuses.

Below is a breakdown of the various forms with some information about each that you may or may not be aware of.

  • ACH/Direct Deposit – ACH stands for “automated clearing house” and is a way for payments to be directly deposited into your account. There is sometimes a fee for the company initiating the payment but not for the company who will be receiving the payment, and they can take between one and three days to be completed. The company who will be receiving the funds needs to provide their bank account number and banks routing number to receive the funds. This can be a great alternative to paper checks, as the money will go directly into your account. One downside, however, is that many banks don’t inform you when the payment is received so you might have to establish a way that works for your company, such as activating deposit alerts, these will allow you to track that the payment has been received. This form of payment is something you could use to be paid and to pay for your expenses.
  • Wire Transfer – A wire transfer is a fairly immediate transfer of funds from one account to another. The benefit over an ACH/Direct Deposit is that it occurs much more quickly, and the recipient does not have to wait for it to “clear.” However, this usually comes with a slightly higher fee for the company initiating the transfer/payment and there is also typically a fee for the person receiving the funds. The company who will be receiving the funds needs to provide their bank account number and banks routing number to receive the funds.
  • Fuel Card – There are many cost-saving benefits of utilizing fuel cards, including discounts on fuel and more which you can read about in our blog post The Skinny on Fuel Cards for Trucking Companies. However, many trucking companies are unaware that some partners, such as some freight bill factoring firms, will load funds directly on a fuel card as a way to quickly get you the money you are owed. Most likely this is not a form of payment you can offer to your clients, but it can be a good solution for some partners. The benefit is that the funds will be available for you to use without you needing to spend the time adding them and there is typically no transaction fee.
  • Money Transfer Checks – There are two types of money transfer checks available only to the transportation industry. These checks are another form of paper checks with the difference being that they are not drawn directly from a bank account
  1. EFS Check – EFS or “electronic funds source” checks are offered through a company with the same initials, Electronic Funds Source LLC. To use an EFS check you need an issue number and transaction number and then EFS needs to provide an authorization number which will all be tied to a specific dollar amount that the check is good for. There can be various fees – and most companies charge a fee to issue the check and some charge fees to cash it too. EFS checks can be used by trucking companies to make payments and also to receive payment from shipping brokers. Not all companies will accept them as forms of payment but most trucking-related services – such as fueling stations, truck stops, and maintenance shops – will.
  2. Comcheks – Comcheks are offered by Comdata. Shippers, brokers, and factoring companies often use them as a form of payment to motor carriers – while carriers can use them to pay for transportation-related expenses such as fuel, maintenance, and lumpers. Additionally, they can be cashed at either a truck stop, which typically will charge a fee or can be directly deposited into your company’s bank account, which may or may not carry a fee to do so. To issue a Comchek you must have an account with Comdata and obtain an “express code” for a predetermined dollar amount. Once the Comchek is received as payment, an express code needs to be obtained from Comdata to receive the funds.
  • Credit Card Payments – Credit cards are a very common form of payment for personal and businesses expenses. It is common to hear that if you accept credit card payments, you will receive payment from your clients more quickly. However, the credit card company charges the company who accepts the credit card a percentage of the transaction and can even charge an additional set transaction fee, which can really add up. There are several ways you can set up to accept credit card payments, and some require you to purchase special equipment, and others can be done through a website or app on your computer or mobile device.
  • Online Payments – Online payment methods are another way to accept credit cards but can sometimes come with lower fees and equipment costs. There are many companies that offer these services, and each one has different costs, requirements, payment methods and methods for getting you the funds. Some companies you could consider if you wanted to explore this option would be PayPal, Square and Intuit GoPayment.

Regardless of your feelings about paper checks as a form of payment, they are certainly one of the more commonly used options and are sure to be for some time. Still, there are an ever-widening variety of electronic methods for disbursing payments and truckers should start looking into them to see if they could be of benefit to their businesses.

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