Hurricane Sandy reminds small businesses importance of disaster preparedness planning

With Hurricane Sandy bearing down across the east coast, small businesses are reminded of the importance of disaster preparedness planning. And direct deposit paycards are an important part of any such plan.

Both local and non-local emergencies can make receiving pay on payday difficult if not impossible for workers who aren't on direct deposit. When natural disasters occur in a hub city from which paychecks are mailed or air traffic is grounded, employees can not receive paper pay checks in a timely manner.

Yet according to a recent NACHA study, small businesses account for nearly 50 percent paper checks written in the U.S., not including government checks. Research suggest that many of the paper checks written in the US are small B2B payments but 12 percent are for small business payroll with two-thirds of small businesses not offering direct deposit via ACH to their employees.

Small business report that they have not adopted direct deposit for payroll for a variety of reasons including that they feel they too few employees, employees prefer checks, or direct deposit is too expensive. However as any small business that has had to deal with replacing lost checks or fraud from stolen checks knows, the added security of protecting the business routing and account number that comes with direct deposit is highly valued. According to an article in the Minuteman News Center, checks have proven to be a dangerous payment method for quite some time and that in 2010 over 540,000 mailed checks were reported lost or stolen and had to be replaced.

Combining direct deposit with paycards, businesses of all sizes can improve efficiencies, reduce costs, and provide their employees with a convenient, value-added benefit. Direct deposit lowers the costs associated with printing and distribution of paper checks, paper check fraud and escheatment. Paperless pay especially benefits unbanked employees. And Hurricane Sandy reminds us of the need to implement a disaster preparedness plan that includes payroll direct deposit and paycards to help ensure all employees get paid when they need it the most.

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