Do You Know How Much It Costs to Accept a Check?

By Collin Sullivan, AVATAS Payment Solutions

It is no secret that a good percentage of merchants in our industry still mail out monthly invoices and get paid by check, but many have no idea what the process is actually costing them.

Do you know how much you pay per check? To help, I’ve put together a basic model that you can use to estimate how much each check is costing you. To make it easier, I’ve put in some generic numbers. If a number is underlined, it is a number that you should switch out with the numbers from your own business:

Step 1: Determine the cost of bad debt:

= Average Ticket Price x Bad debt expense percentage

= $500.00 x .0048 = $2.40

Step 2: Determine the cost of floating money:

= Average Ticket x (Cost of capital / 365 x Payment terms in days)

= $500.00 x (.063 / 365 x 45 days) = $3.88

Step 3: Determine labor costs

= Labor rate including taxes and benefits x (number of minutes to print, stuff, deposit, etc. / 60 minutes)

= $33.58 x (3.3 / 60) = $1.85

Step 4: Determine postage and printing costs

= Printing + postage + return postage

= $0.89 + $0.35 + $0.80 = $2.04

Step 5: Calculate total cost of accepting 1 check

= Cost of bad debt + Cost of floating money + Labor cost + Postage and printing

= $2.40 + $3.88 + $1.85 + $2.04 = $10.16

There you have it. To accept a $500 check from a customer, it costs this typical merchant more than $10.00 or 2 percent of the entire bill. And this doesn’t even consider factors like speed, convenience, security, lost mail, and so forth.

Want to try the calculation for your business? Enter your own costs into the equations above. You need:

1. Average ticket and payment terms (for the equation we used $500)

2. Labor rate and man hours (we used $33.48 from US Bureau of Labor and Statistics for the rate and 3.3 minutes for the time to take care of a customer who pays by check from printing the statement through deposit)

3. Printing, material costs and postage (we used $0.89 for printing, $0.35 for bulk mail outbound postage, $0.80 for business reply postage)

4. Cost of capital: what it costs you to float the money after you have made a delivery but before you get paid (we usually use 6.3% in our calculations).

5. Percentage of bad debt expense: The percentage of your receivables that go into collection and the associated costs (we typically use .48%).

Reach out to me if you have questions or want me to help do a deeper dive into what a check is actually costing you.

Collin Sullivan is AVATAS’s National Account Executive and can be reached at 866.298.7836 or




Pin It

Comments are closed.