Accounting Best Practices, Fifth Edition

3–43. Substitute Wire Transfers for Checks

It is possible to save some of the labor associated with check payments by converting to wire transfers, though one must be aware of the changes in costs that will result.

Paying with a wire transfer involves entering each supplier’s identifying bank number and account number into a computer database, which the accounting software then uses to compile a listing of wire transfer payments instead of check payments. It is common for someone to review this list of wire transfers before it is sent to a bank (in case there are obvious errors in the amounts to be paid), at which point the information is electronically transmitted to a bank, which immediately deducts the money from the company’s bank account and transfers it to the accounts of the recipients. This process completely avoids all of the check-cutting steps outlined earlier in this chapter.

However, there are other steps and costs associated with using wire transfers that one must be aware of before using them. First, it is no longer possible to take advantage of the mail float that goes with check payments (the time interval before the recipient actually receives the check and cashes it), so a company will lose some interest income. This problem can be avoided by delaying the wire transfer payments to match the payment delay associated with mail float. Another issue is the cost of each wire transfer. A company will be charged a fee by its bank for every wire transfer it handles. ...