November 10, 2021

Check Payments are Stifling Your Business Growth

It’s no secret that it costs a lot more to initiate a check payment than an electronic payment.

The transaction processing costs associated with paper checks are more than 30 times as much as those for electronic payments, warns the National Automated Clearing House Association. It is not uncommon for businesses to spend $8 or more to print and mail a single check payment to a supplier.

But sky-high operational costs are just the tip of the iceberg when it comes to the cost of paying suppliers with paper checks. Paper checks also can be a major obstacle to growing your business.

Grow your Business with AP Payments-as-a-Service

Businesses of all sizes are ready to grow again.

Business growth is the top priority of treasurers and a top priority of CFOs.

But the way a company’s accounts payable department pays its suppliers can make it harder for the company to achieve business growth and success. Fortunately, AP Payments-as-a-Service eliminates the hidden costs of traditional supplier payments, freeing up cash that can help a business grow.

Here’s how AP Payments-as-a-Service helps businesses grow:

Improved operational efficiency

CFOs want their finance staff focused on growth-generating activities such as analyzing invoice data, collaborating with stakeholders, and building relationships with strategic suppliers. But the time that staff wastes keying invoice data, shuffling invoices and checks, fixing errors and mistakes, chasing down information, and responding to inquiries about payment status leaves little time for much else.

In a traditional check payments environment, staff must print checks, chase down approvals, generate remittance details, label envelopes and drop them off at the post office, deal with inevitable inquiries from suppliers regarding payment status, and manually reconcile bank statements. Sixty-three percent of businesses cite the operational costs around the reconciliation of invoices and payments as a major pain point, per the Institute of Finance and Management (IOFM). Manual payments processes are so onerous that most businesses must add staff as their payments volume increases.

AP Payments-as-a-Service makes it easy for staff to pay suppliers in their preferred method.

More opportunities to capture early payment discounts

Eighty percent of suppliers are willing to exchange discounts on the amount due on an invoice in exchange for early payment, IOFM reports. The earlier the payment, the larger the discount can be.

Unfortunately, it takes so long for accounts payable departments that operate in a manual environment to pay suppliers that discounts for early payment are out-of-reach. Whether it’s opening mail, keying invoice data, shuffling invoices to approvers, tracking down lost or misfiled invoices, or printing and mailing checks, every step in a traditional supplier payments process takes too long.

Slow supplier payments processes are forcing businesses to leave a lot of money on the table.

With the average discount that suppliers offer for early payment standing at 2 percent, the cash that can be generated through early payment discounts can add up fast. That’s money that a high-velocity business could be reinvesting in growth-generating initiatives such as research and development.

The faster cycle times provided by AP Payments-as-a-Service helps ensure that buyers don’t miss out on opportunities to capture early payment discounts. And the supply chain financing option in some AP Payments-as-a-Service solutions enables early payment without a buyer using their own cash.

Enhanced cash flow visibility

Decision-makers in fast-growing businesses need timely access to cash flow information.

But in a manual supplier payments environment, key information is not captured, systems are fragmented, information is not timely, and decision-makers do not have access to key variables.

And a buyer can never be sure when a check will clear its bank account.

Things aren’t much better for suppliers. Paper processes provide no visibility into where an approved payment stands in the process. Mail delivery is notoriously slow, and checks can become lost or stolen. And suppliers must manually deposit checks into their bank account. Against this backdrop, it’s no surprise that suppliers call and e-mail buyers about the status of payments.

AP Payments-as-a-Service puts smart insights into payments at the fingertips of those who need them. Finance staff can instantly see the status of payments and historical payment trends. And suppliers can count on electronic payments arriving in their account when a buyer says they will.

Cash-back rewards on card spend

Paying suppliers with paper checks offers no opportunities to earn cash-back rewards or rebates.

But most credit cards offer businesses cash-back rebates on their spending. Many businesses are racking up big rewards for large and small payments to suppliers. In some cases, the cash-back rewards earned by businesses have transformed their accounts payable department a profit center.

AP Payments-as-a-Service provide spend analysis services and integrated payments capabilities that help buyers maximize their cash-back rewards, freeing up cash that can be reinvested in the business.

Paper checks cost more than most businesses think. Businesses that pay suppliers with paper checks rather than AP Payments-as-a-Service miss out on benefits that can drive business growth and success.

Break free from checks and manual processes that prevent your business from growing. Contact us or book a meeting to get started!

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