If you believe that writing paper checks is the best way to pay invoices, you’re missing the most effective method for completing the accounts payable process. In fact, writing paper checks may be hurting your business in ways that you haven’t even considered.
Technology is available that can streamline the invoice-to-payment cycle faster, more securely and with significantly reduced cost. Taking advantage of this technology gives your organization the opportunity to redirect resources to more important tasks that have a stronger impact on long-term growth. It’s also a way to avoid some of the problems that you experience when making check-based payments, as described below:
1. Time and Money Required to Fix Payment Errors
It doesn’t matter how careful your Accounts Payable staff is, there will be errors. Some may be caused by human error, while other mistakes may be the result of miscommunication with vendors or issues with invoice approvals.
Your AP staff can spend hours trying to locate the source of an error and then getting it fixed. In the meantime, you’ve either reduced your cash flow by paying too much or annoyed a vendor by shortchanging them. In the end, you’ve added a great deal of cost to the check writing process.
2. Paying Higher Transaction Fees
The cost of writing checks goes far beyond the cost of the check stock itself. At a minimum, a true cost must account for processing time, resources required to issue the checks, envelopes and postage. When you add it all up, it can cost anywhere between $3 and $10 per check. In comparison, processing payments electronically are accomplished at a fraction of this cost.
3. Excessive Human Resources Costs
Manually processing invoices and writing checks is labor-intensive. If you need to continually add to your AP staff to manage the growth of the business, you’re adding more personnel costs to the transaction fees you’re already paying. Not only are you raising your own costs, you may be eliminating a new hire in an area of the business that needs additional manpower to stay competitive.
4. Losses From Making Late Payments
Vendors will reward their customers who streamline their invoice process and pay quickly. Your payments may not be technically late, but if you can’t take advantage of quick-pay discounts, you could be losing a lot of money. And, if in fact your payments are late, you’re losing money by paying more than you should as a result of late payment fees.
Late payments have another hidden cost: hurting your vendor relationships. Your vendors will be much less likely to go out of their way to help you win a big order or provide you with preferred customer pricing.
5. Excessive Management Burden
Management spends a significant amount of time to approve checks with manual invoice processing. The manager responsible for approving invoices can’t be out of the office because he has a stack of invoices to verify and approve. After that, the manager responsible for approving checks must take the time to verify the invoice approval and verify that the invoice and the check match. All the paper shuffling reduces your managers’ effectiveness and increases invoice processing turnaround time. Not an issue if your approval process is electronically driven.
6. Security Problems
Manual invoice processing is a high-risk activity. Even companies that have strict policies and procedures, such as separation of duties and special print access, can experience fraud. Spotting and correcting fraudulent activities is time-consuming and costly. In addition, paper checks can be lost, stolen or delivered to the wrong recipient. In any case, a paper check carries both the bank routing number and your account number to anyone who may open it!
Make sure your accounting processes aren’t hurting your business. It’s time to investigate the benefits of automating your accounts payable and payment processing. The experts at ACOM are prepared to help you ensure your systems are running at peak efficiency. Call us at 800-347-3638, or contact us online for more information.