Mary Schaeffer
Mary Schaeffer

Emerging Issue: Demise of Paper Checks

Are you ready?

February 4, 2010
by Mary Schaeffer

A recent Payments Council Board report indicating that the United Kingdom (U.K.) intends to phase out paper checks by 2018 has some serious implications. While it is not expected that the United States (U.S.) will follow suit immediately, the handwriting is on the wall. For the present, we must all find ways to effectively and efficiently deal with a variety of payment options. Whether we like it or not, relying completely on paper checks to make payments is not likely to be a realistic option for much longer.

Purchasing cards (p-card) and Automated Clearing House (ACH) payments have made serious inroads. What’s more, within the next few years ACH usage will explode and those using p-cards will continue to expand their use. A look at the implications of those trends and presentation of some solutions is clearly in order.

Ramifications of Multiple Payment Vehicles

One of the ways duplicate payments get made is that an organization pays for something with a p-card and the vendor still issues an invoice. Sometimes this happens simply because the vendor cannot suppress the printing and mailing of the invoice. When the invoice is received, even if it notes that it is has already been paid, more than a few organizations end up paying the invoice.

As more payment types become popular, the opportunity for duplicate payments increases. Some of the more popular options that companies use today include:

  • Wire Transfer
  • Paper checks
  • ACH credits
  • ACH debits
  • P-cards
  • Paying from Statements
  • Petty cash
  • Payment via T&E reimbursement

The differing options present a second problem. Accounts payable does not initiate all payments. While accounts payable issues the bulk of checks, employees use options outside the department as well.

When others initiate the payment, they may not use the same controls used in accounts payable. Concepts as simple as vendor naming conventions and invoice coding standards are often alien to those who don’t live with these issues every day.

Unless ever employee making payments use the appropriate controls that are built in across the organization, problems will increase.

Best Practice Controls When Using Multiple Payment Options

With the introduction of differing payment options, two issues arise. First, care has to be taken that payments are not made twice using different options. And, second, when employees in more than one department make payments (as is increasingly common with both p-cards and ACH), more attention needs to be paid to ensure only one person pays for a particular item.

Here are some controls that help keep the issue under control.

  1. Limit payment type i.e. only p-card, from statement etc. While this is not always feasible, it is a great control, if it can be enforced.
  2. Make sure purchase orders (POs) are extinguished whenever a payment is made. Sometimes those outside accounts payable do not realize this needs to be done.
  3. Make sure the invoice number is entered using the coding standard whenever payments are made. This seemingly nit-picky detail can make a huge difference when it comes to preventing duplicate payments.
  4. Make sure the same coding standards are used, especially when entering an invoice number longer than the field in the accounting software as well as for the vendor name.
  5. Establish a payment timing policy adhered to by everyone.


New technologies present new problems and the payment world is no exception. As use of these differing options becomes more common, someone needs to take the lead and (gently) coerce the use of standards to help prevent duplicate payments. A side benefit is the potential reduction in fraud. Without these controls the savings accrued by the new options will be overshadowed by the losses due to erroneous payments and fraud.

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Mary S. Schaeffer is the author of over a dozen business books including The Controller & CFO’s Guide to Accounts Payable and Fraud in Accounts Payable: How to Prevent It. She is the publisher of the CFO & Controllers Accounts Payable Management Journal, a quarterly electronic journal for senior executives concerned about internal controls and cost control in their payment function, writes a monthly newsletter, a free weekly ezine e-AP News, speaks at accounts payable webinars, seminars and conferences and directs the organization’s consulting practice.