Many people, businesses, including nonprofits, have stopped paying their bills using checks, envelopes and postage; instead, they prefer to use the Internet to make payments. It can be very convenient. When paying bills online, you have a few options, such as bank-generated payments and vendor-generated payments.

Bank Generated Payments

Many banks offer bill paying services for free. You enter the vendor's name, address and an amount at the bank's website and a check is issued on a specified date. Every month you must log in the bank site and change the amount to be paid. It's simple and straightforward. 

This system is great for people who travel a lot, and want to have control over bill payments. this also works well for small or one-person accounting departments. Depending on your bank, you can sign up for checks to be issued for certain amounts every month, such as for mortgage or rent expenses. When you use this method, payments go out without you having to log in and authorize them individually. Be sure to schedule payments in advance of due dates, and beware that sometimes payments are not received by vendors and are returned to the bank. Test the system by sending payments many days before they are due, so that if they don't go through, you don' t use the bank service. Usually, if the first bank payment goes through, chances for problems down the road are slim.  

Vendor Generated Payments

This type of online payment has been around before the Internet became so popular. The idea is to let the vendor to debit the payment from your checking account at a certain date every month. Instead of the bank making payments, the vendor pays itself by using your account. You can allow individual payments to be taken from your bank, or you could go to "auto-pay," when payments are debited from your account every month. You don't need to worry about payments -- if you have a balance in your account, payments are done behind the scenes for you. Many people use this option with credit card companies to get the minimum amount paid every month. 

Auto-pay can be a good option if you travel a lot, or you want avoid late charges.Same comment for one-person or small accounting offices. However, once you're on auto-pay and you find an error in the bill, the payment may come out of your account, and it may take time to get the issue resolved. Because of this issue, usually auto-pay using a credit card may be better since it may be easier to get money back.

Another problem with auto-pay is that you cannot stop your bank from accepting the charges. For example, if you signed up for loan payments using auto-pay, these businesses can debit your account even after you pay your loan in full. Your bank may give you credit, but the process can be a hassle to resolve. Often banks advise customers to close accounts to avoid auto-debits, which can be problematic for nonprofits and small businesses.

Special Considerations

Setup a procedure to use online payments and keep up a written list of such payments to document ALL online payments to avoid confusion. For instance, a bookkeeper may pay a bill with a check, while the same bill is paid automatically by a vendor. Accounting staff needs to be aware of all Internet payment types to avoid double paying or paying late. 

Another concern is to make sure that internal controls exist to prevent misuse and errors in online payment processing. For example, an accountant may set up auto-pay in a bank to pay a fictitious firm and nobody would know about it. To avoid this problem, make sure that someone outside accounting, such as a manager or board member logs in the bank website and review auto-payments and debits to the account at least once a month. Some banks offer the option of emails be sent to business owners or someone outside accounting to provide a form of internal control to this process.

Read about donations details that matter
Read about volunteer retention ideas
Check out 'Nonprofit Finance: A Practical Guide" -- Nominated for the McAdam Book Award
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