Mike Kresse | Thursday, September 8, 2016
In a recent FIS payments and bank connectivity market study, corporations indicated that the primary reason that they use checks is supplier preference (41 percent) as opposed to benefits to their organization itself. Fifteen percent also indicated that their suppliers do not have bank accounts available to receive electronic payments, while 11 percent noted that they value the ability to send remittance information to suppliers when sending checks.
There are also other reasons corporations might be holding back the migration of checks to electronic payments including the perceived advantages of float and retaining check-based fraud prevention services. However, the perceived advantages of check float are quickly diminishing due to electronic check imaging. Sending paper checks to remote locations is no longer providing the same buffer it used to now that transactions are increasingly being processed with ACH and virtual cards. Meanwhile, the high costs for cashing checks and wide availability of alternative payment methods, such as virtual cards, are changing old opinions.
Change is underway however. According to a recent AFP survey, 50 percent of B2B payments are made via check vs. 70 percent just a few years ago. And companies are reaping the benefits: those who outsource their payment execution processes to an integrated payments provider – offering value-added services, including vendor enrollment, data management and ongoing support services – are able to streamline their AP processes, reduce costs and migrate away from paper checks much more rapidly.
Companies looking to outsource their payment execution processes should look for a provider that can manage all of their various secure bank connections and is able to send virtual card payments to suppliers. Remittance should no longer be an issue either. With the right solution, suppliers are able to receive payment and remittance information at the same time, so payments are reconciled to invoices quickly and accurately.
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