When someone says “the check is in the mail,” do you believe them? Or, have you been burned too many times before to trust that person? You are not alone; many business owners have become jaded by the lack of sincerity behind that phrase.
What if there was a better way to receive and send payments? That is where electronic payments come into the picture. Read on to learn why business check usage is decreasing, and what still holds companies back from adopting electronic payments.
What Is the Future of B2B Payments?
In a recent study, NACHA and the Credit Research Foundation discovered that B2B ACH credits will surpass business checks by 2020. Why is that the case?
Electronic payments, such as B2B ACH credits, are simply more efficient. Matt Skudera, VP of Research for the Credit Research Foundation, noted, “Moving to electronic alleviates pressures and provides consistency in process, with measurable results in effectiveness of cash flow, DSO (days sales outstanding), and relative performance of operations.”
This is not a trend that has simply taken hold overnight; electronic payments have been steadily increasing for years. In 2004, businesses made 81% of their B2B payments by check, on average. Just a few years later, that number dropped to 74%. Electronic payments lead to lower transaction costs, better cash-flow predictability, and increased efficiencies with accounting systems.
What Is Driving Electronic Payments?
The shift towards electronic payments is being driven by B2B customers who want the speed, cost benefits, and convenience of not paying by check. In addition, e-commerce has become significantly more popular. Many e-commerce firms do not accept checks; they want electronic payments.
There is a great opportunity to allow customers to make electronic payments. B2B customers typically order numerous items at a time or items that are high value. By adapting your payment systems to accommodate B2B customers who want to pay through electronic payments, you will broaden your customer base.
Why the Business Check Is Not Dead Just Yet
The business check might be less popular, but it is not dead quite yet. One reason that people still pay by business check is because they do not have the payment systems that support electronic payments. These are, in many cases, also the same companies that have low levels (if any) of integration infrastructure; they believe they are too small to support that technology or there is no need for it.
However, a lack of integration infrastructure and reliance on manual payment methods is actually costing them money. B2B integration allows organizations to send information and payments quickly to trading partners. Manual methods of sending payments and information, on the other hand, are expensive; what happens when your check gets lost in the mail? Neither the payer nor the recipient has any recourse.
Enhancing your integration infrastructure as well as moving to electronic payment systems can save money and provide a competitive advantage. Calculate your cost Download our free EDI Calculator to see how much you can save.