Transitioning your AP team to electronic payments definitely provides benefits, but is your e-payments solution actually giving you all the benefits you need? Not necessarily.
Paying invoices by methods other than paper checks has been around for quite a while. From ACH payments to company credit cards to wire transfers to P-cards, businesses have slowly been eliminating the costly and inefficient “pay by paper check” tradition. Postage and the checks themselves can add up to an alarming amount.
$100 billion in annual spend for processing and issuing paper checks?????
It may seem incredible; however, last year, American Banker magazine published an article on B2B payment methods. They noted that a Federal Reserve payments survey found that 8 billion (yes, that’s billion with a “b”) B2B payments are made by paper checks annually which adds up to nearly $100 billion in annual spend for processing and issuance costs.
Besides the cost, there are no significant benefits to sending paper checks by mail, other than the potential “float.” Plus there is the fact that some suppliers still demand on receiving payment in that format. However, an Ardent Partners white paper, “The State of B2B Payments 2015” noted, as e-payment technologies become more mainstream and user-friendly, more suppliers are accepting payment electronically.
Let the banks and credit card companies handle it
For many companies the electronic payment solution has been to let the banks and the credit card companies handle all payments. It certainly eliminates a lot of the manual labor and cost associated with paying by check. All a company needs to do is generate a check run from the company’s ERP or financial system, indicate which checks get paid when, give that file to the appropriate bank and that bank will send out a payment to the supplier, generally in the form that supplier chooses to receive it, including ACH, P-card, or other electronic format or, when necessary, as a paper check. Paying through a credit card like American Express can be a bit more difficult, since only those purchases made using the Amex card will be paid by American Express. And that’s pretty much the end of their involvement. Doing this will relieve some costs and labor, but there’s a better way.
Making payment the last step in a fully automated P2P process
A growing number of companies are implementing automation and digitization throughout their financial processes. When automating payment as the last step in the process, additional benefits are realized. If you’re paying suppliers through a bank, you still have to do all of the heavy lifting. That includes ongoing and time-consuming communications with suppliers, with the goal of converting those who are still resistant to receiving payments electronically. You should look for an e-payment solution provider who will communicate directly with your supplier base, working to get them to understand how accepting P-card payments will be to their advantage as well. In addition, the solution provider will continually update your supplier file as the supplier’s needs, requirements, and information changes. That e-payment provider will be working behind the scenes to efficiently manage the data you need to make the decisions essential to controlling cash flow and optimizing working capital.
Discover how implementing an e-payment solution can streamline and automate the last step in the invoice chain.