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It’s (Really) Time to Move Away from B2B Check Payments

B2B check payments are gradually disappearing-and it’s about time.

According to a report by PYMTS.com and MasterCard, when sending invoice payments to vendors, only 34% of all companies still use B2B check payments more often than other payment methods. Another 30% expect their check usage to decrease. While these shifts have previously been more apparent among larger companies, they are now occurring across companies of all sizes as technology continues to make checks seem extravagantly burdensome for business to pay with. This makes sense when you consider the fact that Venmo and PayPal have long since deemed P2P check payments obsolete.

If your business relies primarily on B2B check payments, you are paying in excess for it—whether you realize it or not. Electronic payments have made the hard costs of B2B check payments disappear—including paper, postage, and time spent stuffing envelopes—but only for the companies that have adapted to the latest technology.

For those businesses that still haven’t made this move, now’s the time to catch up with other businesses and move towards electronic payments. Whether it’s ACH or virtual card credit card payments, there are categorical advantages for businesses that pay electronically that you could be missing out on.

Electronic Payments Improve Cash Flow and Increase Working Capital Benefits

One key benefit realized by businesses making electronic payments is improved short-term cash flow. For those making ACH transfers—whether it’s a same-day or a three-day clearing period—the settlement time is greatly accelerated in comparison to paper checks sent through the mail. Faster payment processing gives your business increased command over short-term cash flow and the ability to either quickly make payments to cash in on early-pay discounts, or retain large sums of cash for longer amounts of time.

In a similar vein, by using your corporate credit card, you can wait until the very last day a payment is due before giving up the funds owed to vendors. But beyond maximizing capital usage, it also has a unique opportunity to increase capital. That’s because most credit cards have cash-back rebates. Using corporate credit cards to pay vendor invoices can thus provide a significant, steady stream of income.

Using either of these methods drastically increases the amount of cash you have on hand for operations and capital expenditures. It also allows your company to maximize the use of its trade credit by using every dollar in its cash flow as much as possible. Your company can effectively borrow money for free. That’s key! Even an additional $5K in capital per $1 million in operating expenses can improve the performance of the organization.

Electronic Payments Allow You to Eliminate Hard Costs of Checks and Reduce Fraud Risk

In addition to improving cash flow and capital management, utilizing credit cards and ACH transfers to pay vendor invoices also eliminates the hard costs created by B2B check payments, which can run more than $12 per invoice payment. These costs range from postage to envelopes and late payment fees as well as the resource time to process the paper checks.

Another key benefit comes in the form of reducing your fraud risk. Paper checks remain the primary target for fraudsters in comparison to other payment methods. A 2018 report issued by the Association for Finance Professionals revealed that 74% of finance professionals reported their organization’s check payments were exposed to fraud.

On top of eliminating hard costs and reducing the potential for check fraud, organizations can also capitalize on savings through efficiency by moving away from paper. Processing invoices digitally is estimated to cost 90% less than processing B2B check payments.

The Best Path to Electronic Payments is Automation

A great way to streamline the process of transitioning from B2B check payments to electronic payments is to automate the entire accounts payable process. This includes automating the steps for capturing vendor invoices, securing invoice approvals from business units, getting payment authorization from executives, and then executing the payments. Once all of the processing is taken care of, you can simply match up each invoice in a payment run to the most advantageous payment method in a few easy clicks.

In many cases, automated accounts payable solutions also accomodate B2B check payments by processing them on your behalf, making it possible to transition payment methods gradually as you free up time to focus on making the switch through automation.

Curious to learn more about automating AP? Contact MineralTree for a personalized demo!


Scott Siegler
Scott is the editor of MineralTree's Invoice-to-Blog, and also the curator of The Proper Payable, a weekly email newsletter covering the best (and worst) in financial strategy.


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