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Moving Your Business Off Paper Checks in 2026: Payment Tools Compared
The IRS is phasing out paper checks, check fraud is still high, and the tools to replace your checkbook are cheap. Here is how the options compare for a small team.
- (Author)
- Ines Calloway
- (Published)
- (Reading)
- 7 min
- (Section)
- Tools
In this guide 9 sections
Most small businesses can stop writing paper checks in 2026 by moving vendor payments to ACH bank transfers, using bill pay software that syncs with their accounting, and paying federal taxes online. The IRS is phasing out paper checks on its side. Keep a checkbook only for rare holdouts, protected by your bank's positive pay service.
I set up payment systems for small firms for ten years. The checkbook was always the last thing anyone wanted to touch, because it worked well enough. In 2026 there are two good reasons to touch it. The government is moving away from paper, and paper checks remain a favorite target for thieves.
This comparison is for owners and office managers at businesses with 5 to 50 people who still write checks to vendors, landlords or the IRS. It covers what the federal shift means, how the main replacement tools compare, and how to switch without breaking your bookkeeping. Facts are as of October 2026.
Why Paper Checks Are on the Way Out
The push is coming from Washington and from the banks at the same time. In March 2025, Executive Order 14247 directed the Treasury to move federal payments, both to and from the government, to electronic methods. The Internal Revenue Service (IRS) has been putting that into practice since.
According to the IRS questions and answers on Executive Order 14247, the phase-out of paper refund checks began on Sept. 30, 2025. The IRS is adding direct deposit to most business tax return types. It still accepts checks where no electronic option exists or in hardship cases, but it plans a full transition over time.
The wider market is moving the same way. The Federal Reserve's 2025 Payments Study top-line data counted 9.2 billion check payments in 2024, down from 11.0 billion in 2021. That is a 5.9 percent drop per year. Over the same period, the average check grew to $2,653, which tells you checks are now mostly used for larger business payments.
How Much Risk Do Paper Checks Carry?
More than most owners assume. The Financial Crimes Enforcement Network (FinCEN) reported that banks filed over 680,000 suspicious activity reports on check fraud in 2022. That was nearly double the year before. Business checks stolen from the mail were among the targets, and a single altered check can drain an operating account.
FinCEN's alert on mail theft-related check fraud was issued with the US Postal Inspection Service. It says criminals target personal checks, business checks and tax refund checks alike. The report count was over 350,000 in 2021, already up 23 percent on 2020.
In my consulting work, the clients who got hit were rarely careless. They mailed checks from the office like everyone else. One stolen rent check is enough to make an owner rethink the whole process, and it is far cheaper to rethink it before that happens.
The Replacement Tools Compared
There are four realistic ways to replace the checkbook for vendor payments. They differ less on price than on how much retyping they remove. The table below compares them on what matters for a small team.
| Tool | What it replaces | Main strength | Main drawback |
|---|---|---|---|
| ACH from your bank's online portal | Writing and mailing checks | Low cost, no new vendor | Manual entry, no sync with your books |
| Bill pay software linked to accounting | Checks plus invoice data entry and approval emails | Bills, approvals and payments in one record | Monthly subscription, another login |
| Business card or virtual card | Small, recurring checks to suppliers | Fast, and adds float before the card bill is due | Vendor may add a card fee |
| Wire transfer | Large, urgent one-off payments | Same-day, final settlement | Hard to reverse if you are tricked |
My rule of thumb is to count bills, not dollars. If you pay fewer than about ten vendors a month, bank ACH is fine. Above that, the hours spent keying invoices into two systems will outweigh a software subscription.
Bill Pay Software: When It Earns Its Fee
Bill pay tools sit between your inbox and your bank. You forward an invoice, the tool reads it, someone approves it, and the payment goes out by ACH, card or a mailed check the service prints for you. The payment then syncs back to your accounting software as paid.
That last step is the real value. Without it, someone has to match each bank transfer to an invoice by hand at month end. With it, the record is complete the moment the money leaves.
Check three things before you sign up. First, confirm it syncs both ways with your accounting system. Second, check that it can store vendor tax forms. Our guide to the new $2,000 1099 threshold for contractors explains why a W-9 on file before the first payment saves trouble later. Third, ask how easy it is to export your vendor list if you leave.
Positive Pay for the Paper Checks You Keep
Almost every business keeps a few paper checks. A landlord who will not take transfers, a local supplier, a refund to a customer. For those, the tool to ask your bank about is positive pay.
Positive pay works on a simple match. You send your bank a list of the checks you issued, with numbers and amounts. When a check comes in for payment, the bank compares it with the list. A check that does not match, or a number you never issued, gets held for you to approve or reject.
Some banks also offer a version that checks the payee name. That matters because a washed check often keeps the original amount but changes the name. Ask your bank which version it offers and what it charges. In my experience, the setup takes an afternoon, and most of that is getting the issued-check file out of your accounting software in the right format.
Cards and the Reporting Side Effect
Paying suppliers by business card is quick, and many owners like the extra weeks before the card bill is due. It also changes who reports the payment to the IRS. Payments made by card or through a payment network are reported on Form 1099-K by the payment company, not on your own 1099-NEC.
That is a real convenience for a busy owner. It also means your contractor report needs to know which payments went by card. If your software lumps card and bank payments together, you can end up filing a form you did not need to file.
The cost side is simple to check. Some vendors add a surcharge for card payments. If a supplier charges extra to take your card, ACH is usually the better route for that one.
Paying the IRS Without a Checkbook
Tax payments are where the federal shift hits hardest. The IRS lists four electronic options for businesses: debit or credit card or digital wallet, IRS Direct Pay from a bank account, the IRS Business Tax Account, and the Electronic Federal Tax Payment System (EFTPS). Federal tax deposits, such as payroll taxes, must already be made electronically.
One change matters to sole proprietors in particular. The IRS says EFTPS payment options will be sunset for individual taxpayers in late 2026. New individual enrollments stopped on Oct. 17, 2025. If you pay personal estimated tax through EFTPS, plan your move to Direct Pay or your online account now.
Payroll is the other big money flow, and it moved to direct deposit years ago at most firms. If you are reviewing payroll settings while you sort out payments, our guide to reporting qualified overtime on 2026 W-2s covers what your payroll provider needs to change this year.
How to Switch Without Losing Track
A payment switch fails when nobody owns it. I have seen firms move half their vendors to ACH and then forget which half. Run the switch as a short project with one owner and a deadline.
These are the steps I use with clients, in order:
- List every check you wrote in the last six months. Your bank statement or accounting software will show them.
- Sort payees by method. Mark each as ACH, card, IRS online or must stay on paper.
- Collect bank details in writing. Use a signed form, and confirm by phone using a number you already have.
- Set a verification rule. Any request to change bank details gets a call-back before payment.
- Turn on positive pay for the leftovers. Your bank compares each presented check with your issued list.
- Order fewer checks. A smaller checkbook is a simple way to make the change stick.
The verification rule matters most. Electronic payments remove mail theft, but fraudsters then switch to fake emails asking you to update a vendor's bank account. A two-minute phone call to a known number stops almost all of it.
Which Setup Fits Your Business
For most small teams, the right answer is a mix. Use bill pay software or bank ACH for regular vendors, a card for small suppliers, and the IRS online tools for taxes. Keep paper checks for the rare payee who cannot take anything else, with positive pay switched on.
Start this week by listing last quarter's paper checks. The list is usually shorter than owners expect, and moving the top five payees covers most of the risk.
