You have a new office space that needs a serious renovation. You know what’s trending, you watch HGTV. And you hire a contractor that specializes in feng shui and knows the importance of the ergonomic workstation. It’s a beautiful partnership, all your office chairs have appropriate lumbar support. But now comes the tricky part – how do you pay? Checks? Cash? ACH? Credit card?
Now, in order to understand the best method to pay your awesome contractor, you need to understand the nature of contractual services.
Let’s break it down —
- Contractors typically provide a service (such as renovations or establishing an IT network) in multiple phases over a set amount of time
- Payment for the service normally results from reaching project or time-related goals
- You may have to pay half up front and half upon completion. Or, If the project is especially complex, you may be looking at multiple payment deadlines within its span
With all this in mind, you don’t want to pay too soon and risk that a contractor will leave a project half finished. At the same time, you want to pay on schedule so that work doesn’t stop. Most importantly, you want to protect your company from unnecessary risk or delays.
So what’s the best way to pay?
Cash and checks are the popular choice. But cash can be lost and checks can be stolen — making both of these payment options a risk. In order to fully protect your business and ensure the success of the project, it’s best to pay your contractors electronically through methods such as ACH or credit card. Still need convincing? See the benefits below:
1. Protection
First, online payments provide an additional level of protection when it comes to paying contractors. For example, many credit cards offer fraud protection. If a contractor is not legitimate or does not complete the job as agreed upon, you can enact fraud protection to dispute payment. And, you can rely on this same protection if the job is left incomplete.
Second, by using online payments such as ACH or credit cards, you avoid using paper checks or cash. Handing out paper checks gives its recipients all the information they need to perpetrate fraud – bank name, routing number and accounting number. Cash can be lost or stolen – meaning it may never show up as a payment on your account. When you use online payments solutions, critical information such as your banking information isn’t shared with the recipient.
2. Audit trail
Unlike paying with cash, paying digitally creates a record of payment. Each payment is preserved and ready for reference. That way, if a contractor says he or she has not been paid for work you can quickly open your credit card account or online bill payment solution and provide evidence that it has been paid. Conversely, paying with cash won’t create that necessary audit trail needed to protect your accounts payable.
3. Consolidation
By paying digitally for a contractor’s services, you are creating a consolidated record of payment activity – meaning you aren’t sifting through various check stubs and receipts to identify and track payments.
4. Control over AP
Online payment solutions let you schedule or immediately send payments, which means you control your AP. A payment taken directly from your banking accounting via ACH will immediately reflect on your account – which means your business isn’t left with inaccurate financial reporting as it waits for checks to clear. Your business will have a real-time picture of its financial performance.
5. Make your contractor happy
Many contractors appreciate digital payments. With an online payment, they’ll get their money quicker and with less hassle then paper checks or cash. There’s no need for bank runs. Happy contractors equal better results, which lead to longer lasting relationships – both great benefits for your company.
Pay your contractors digitally, your back will thank you.