Manual payments explained

Manual payments, also known as non-electronic or paper-based payments, refer to the process of completing financial transactions without the involvement of electronic systems or automated processes. In the context of online payments, manual payments typically involve physical methods, such as checks or money orders, where the payer manually prepares and delivers the payment to the recipient. While digital payment methods have gained popularity, manual payments remain relevant for certain individuals and businesses who prefer – or require – physical instruments for their financial transactions.

In an increasingly online and automated world, is there still a place for manual payments? Yes, if your customers prefer them. According to a 2021 Mintel report, credit cards are preferred by older consumers, with younger generations preferring a mix of digital payments, debit cards, and cash. We’ll look at the benefits and challenges of manual payments in this guide to help you choose the best payment methods for your business.

What is the manual payment definition?

The manual payment meaning applies to any payment that requires manual input from the vendor. If you operate an in-person POS, this means that many transactions require manual input. Whether it’s taking cash and counting out the change, accepting checks, or reconciling invoices, these are examples of manual payments.

By contrast, automated payments don’t require any input from the vendor. Instead, the automated system handles transactions. Examples include billing software and automated online checkouts.

What are the types of manual payments?

Here’s a quick look at the various types of manual payments you might come across.

1. Cash and checks

The most obvious example is cash, which is still used across all age levels. While many businesses have gone cash-free at the point of sale, they could potentially lose business from customers who prefer to carry cash. Manual check payments also exist, although they’ve become far less common than in the past.

2. Manual card payments

Debit and credit card transactions are often manually processed. One example is card not present transactions, where customers provide their card details over the phone. This requires the vendor to manually enter details into the POS system. Similarly, Virtual Terminals transform your computer into a POS to verify payment details.

3. Manual ACH payments

Bank transfers using the ACH system are often automated, but some invoices require manual processing. While the transfer of funds is automated through the bank’s systems, you’ll need to manually reconcile the payment received with invoices if you don’t use automated invoicing software.

How long does a manual payment take?

Processing times will vary widely depending on the type of transaction and payment method used. While credit card and ACH payments might be processed within 1-3 business days, settling a cash payment can take longer if it relies on a company bank run. Manual payments nearly always take longer than comparable automated payments.

Are there benefits of manual payments?

They’re time-consuming and take longer to process, so do manual payments benefit business owners? Here are a few:

• They cater to some customer preferences, particularly those of an older or more traditional demographic.

• They attract customers who prefer to shop in person or over the phone, increasing your market reach.

• Some industries, such as second-hand markets, are more suited for manual payments.

• Large B2B transactions often require manual processing to complete the sale.

Generally, whether you need manual payments will depend on your customer demographic, industry, and sales volume.

What are the risks of manual payments?

On the other hand, manual payment processing doesn’t come without challenges or risks. To begin with, there’s an inherent risk of human error associated with any hands-on processing. There’s also a risk of fraud. Signatures are easy to forge on checks, and paper trails are easy to intercept. By contrast, electronic transactions are fully encrypted from one end to the other, making it harder to divert or redirect funds.

To make manual payments safer, it’s important to use proper authentication procedures just as you would with an electronic payment. Of course, automating your payment systems is the best way to avoid these risks. While you might offer customers the option of cash and checks for recurring payments, automation is generally the way to go. GoCardless can help businesses automate recurring payments for invoices, subscriptions, membership fees, and more. This cuts down on processing times and fees while improving cash flow.

Key Takeaways

Manual payments, including cash, checks, and manual card or ACH transactions, still have a place in certain customer preferences and industries. They cater to traditional demographics and allow businesses to reach customers who prefer in-person transactions or providing card details over the phone. 

Risks of manual payments

However, manual payments pose risks of human error and fraud, making proper authentication procedures crucial. Automation, such as GoCardless for recurring payments, can help streamline processing, reduce fees, and enhance cash flow.

Automated payment benefits

Automated payments offer a seamless and efficient alternative to manual processing, saving valuable time. By choosing automated payment systems, businesses can effortlessly schedule recurring payments, guaranteeing fast and reliable transactions. Moreover, these automated transactions provide businesses with invaluable data insights, empowering them to analyze customer behavior, optimize operations, and make well-informed decisions to drive growth and enhance efficiency.

Case Study: Diaper Stork

Diaper Stork, an eco-conscious diaper service and baby boutique in Seattle, sought to reduce its overhead costs after Carrie Pollak took over the business in 2018. Recognizing that payment fees were a significant factor, Carrie began exploring lower-cost alternatives and discovered GoCardless, which integrated seamlessly with the accounting platform Xero. 

By offering customers the option to pay through GoCardless ACH debit, Diaper Stork reduced transaction costs by 2% compared to credit cards. While credit card payment options are still available, Carrie encourages customers to consider the benefits of low-cost ACH debit payments, emphasizing the positive impact on small businesses and the local economy.

The integration with Xero also saved time on reconciliation and accounting, allowing Carrie to focus on higher-level strategies. 

Additionally, GoCardless provided convenience for busy parents, ensuring automatic payments for subscriptions and giving customers control over future payments. 

With its commitment to sustainability and customer satisfaction, Diaper Stork sees GoCardless as a long-term partnership that aligns with their mission of making parenting more sustainable and environmentally friendly. With GoCardless, parents have one less thing to worry about.

We can help

Setting up payment collection is fast and efficient with GoCardless. By automating the payment collection process, GoCardless drastically cuts down the administrative responsibilities of managing and tracking invoices for your team. 

GoCardless makes it quick and easy to get started with no contracts or long-term commitment required. You can set up one-off or recurring payments in the merchant dashboard in just a few clicks. GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over 350 partner apps, such as Xero and Salesforce.

Discover how GoCardless can automate payment collection, making it easier for you to concentrate on what matters most – your business growth.