Site logo

Cost Effective Ways to Pay Vendors

July 12, 2016

Tax Question:

Do you know the most cost-effective way for your business to pay vendor invoices?

Facts:

There are many options for issuing payments to vendors; however, the fees involved need to be taken into consideration as over the course of a year it can impact your company’s bottom line.

Discussion:

The company is considered to have a permanent establishment presence in any Canadian province where any of the following conditions are met:

  • Cash/debit cards are not the most convenient way for a business to pay vendors unless they are in the vendor’s business location. There are no fees associated with using cash, but debit cards can incur fees up to $1.50 per transaction depending on your financial institution. Furthermore, if you go into your line of credit or overdraft, there will be interest and overdraft fees.
  • Cheques are still a popular method, albeit a slower one and could cost up to $1.50 per transaction. There is also the cost of printing and mailing cheques, as well as, the time involved in issuing cheques. One can understand why cheques are declining as the “go toÓ method.
  • Credit cards are a convenient way to pay vendor invoices. There is no fee involved in paying invoices as long as the balance on your credit card is paid in full each month. If you have an outstanding balance with your credit card company, it could cost your business up to 21.5% in interest. Another perk of paying by credit card is collecting reward points if your card provider offers this service.
  • Online banking is a safe and convenient way to pay invoices if your vendor is an eligible payee with your banking institution. Much quicker than issuing cheques, this method can be done 24/7 and you can even set up postdated payments so you never forget to pay an invoice on time. Individual transaction fees can range from $1.00-$1.50 each depending on your financial institution. Be sure not to go into your overdraft or line of credit or you will incur interest charges and overdraft fees.
  • E-transfers are quickly gaining in popularity and is a secure way to move funds from one bank account to another. It requires only an email address or mobile phone number plus a Canadian bank account. No identifiable banking information is shared, making this a convenient way to pay vendors at only $1.50 per transaction.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

Share this post

Related posts