The Pros and Cons of Direct Deposit for Small Business

Direct deposit for small business is full of pros and cons, but it’s an increasingly popular option, and for good reason. But as a savvy business owner, you need at least a basic understanding of how the pros and cons fit with your own business model and payroll needs. An industry-leading payroll software provider for small and medium-sized businesses, Advanced Micro Solutions (AMS) wanted to help our business customers understand this choice for their company.

Is Direct Deposit Safe?

Payroll security is both a pro and a con when it comes to direct deposit. The consensus is that payroll checks are more susceptible to fraud and counterfeit. However, that’s not the whole story. For one thing, so long as they use MICR bank checks, most employers are not overly concerned about employees forging paychecks. Typically, a bigger problem is employees losing their paychecks, which comes with its own headaches.

Moreover, direct deposit for small business is arguably more susceptible to internal bookkeeping errors. You need to ensure that all bank and routing information is up to date. Plus, if you make a mistake, it’s typically a lot easier to get a Stop Payment order on a check rather than trying to claw back funds that have already landed in an employee’s account. Remember Office Space when Initech was mistakenly paying an employee who was no longer on the payroll? This stuff can happen to real-world businesses, too, if they’re not diligent about monitoring/auditing their accounts.

Is Direct Deposit Cost-Effective?

The short answer is yes. Without a doubt, direct deposit is cost-effective. In many cases, it’s the most cost-effective. Simply put, it costs more to produce, mail, and track MICR paychecks than to use direct deposit and ACH payments. True, you’ll still likely want to provide your employees with some sort of paystub, but these documents can be produced on plain white paper and office printers.

Of course, different banks and financial institutions charge different fees for their direct deposit customers/transactions. It’s also true that you don’t have to go through your bank to set up and use direct deposit. In addition to your bank’s ACH deposits, AMS Payroll is compatible with National Payment Corporation and their direct deposit system.

That said, it’s also true that, with the right software, you can typically save money on traditional paychecks by printing your own MICR bank checks. In fact, MICR check printing is one of the key features of our Software Generated Forms module. You’ll need to buy the special magnetic toner, but otherwise you can use most any type of office printer.

AMS Payroll Processing and Direct Deposit for Small Business

If you’re looking for straight-up advice on your payroll, we recommend direct deposit for small business, everything else being equal. With payroll software from AMS and competent bookkeeping, you can quickly and reliably build a direct deposit solution that will save your business money on its payroll and accounting expenses.

At the same time, we recognize that there are potentially dozens of different factors that go into choosing a payroll solution. We’re not saying direct deposit is right for every small business out there. Again, we’ve developed a separate software module as a better produce MICR checks for your payroll. Powerful yet user-friendly, our software solutions are used by both business owners and payroll accountants. In addition to MICR check writing software, AMS Payroll already includes support for over 30 different types of checks and check vouchers. Learn more about our products, or download our free demo to see our software in action.


Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.