Today, in my inbox was my daily Google Alert I have set up on the term "ACH". It picked up a press release from National Automated Clearing House Association (NACHA). They oversee the ACH banking system. The press release spoke to how direct deposit is good for the environment. Ok, I can get behind that, but I had to take it with a grain of salt knowing who's behind the press release.

Most large companies offer direct deposit for payroll. That's a pretty obvious statement, but they go on to say that a business with 300 employees who run payroll bi-weekly "would save 121 pounds of paper and avoid the release of 346 pounds of greenhouse gases into the atmosphere in one year." Not bad.

This reminded me of a conversation I had about 10 years ago when I found out that one of our developers still received a paper check. She got razzed for not moving to direct deposit (all in good fun). I figured it would only be a matter of a couple years before we had 100% of our employees on direct deposit (as well as our customers' employees).

I was wrong. Fast forward 10 years and this developer has moved to direct deposit only a year ago. It took a little longer than I expected. But to my surprise, we now have a few other employees who are relatively new still getting pulp-based paychecks.

What's going on here? If we're running 6% or so on checks and you spread that across those customers of ours who use AccountEdge or Premier Accounting to run their payroll, we're talking about A LOT of trees. And, I know that a majority of our customers running our payroll aren't using our direct deposit add-on service, so it's a much higher rate. Why is this?

The reasons for the employee choosing not to go on direct deposit are going to be much different than that of the business not offering it. For the employee, it could be the satisfaction of putting their earnings in the bank. Or maybe they're going to the bank anyway to withdraw cash at the time of the deposit. Maybe some are stuffing cash under their mattresses. I'm not sure.

For the business, I figure it comes down to cost. This is where the release got really interesting. They claim that an average of $6.7 billion was saved by businesses over the last decade, equating to $176.55 per employee. Yes, that is over a decade but I was still intrigued as to how they calculate this.

There's a link in this press release to a cost savings calculator. Where businesses save is mainly with the time it takes to deal with checks as well as some hard costs. Everything from reconciling individual checks to dealing with lost checks, envelopes, cost of the check, mailing checks if they aren't handed out, stuffing envelopes, signing checks...you get the idea. They net out the cost of a direct deposit and other paper checks, which depending on how you process your payroll, is an add-on or included in a service if outsourced, etc.

It's always hard when speaking to some business owners about the cost of their time where I see the real savings. I find that most small businesses see the opportunity cost but only the successful ones act on it. Yes, there are some hard dollars saved but what could you or your bookkeeper be doing instead of stuffing envelopes or tracking down undeposited checks?

As for the environment, there are a few things that Acclivity can do. As I mentioned, most of our employees are on direct deposit but even though most are on direct deposit, I still get what is more or less a paycheck with a pay stub. Why is this? Can we opt out of receiving this and instead give employees an option to log in to view their pay stubs? I hope so and will be looking into it.

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Posted by Tom Nash on May 4, 2009 12:29:00 PM EDT#