Using electronic B2B payments have proved to be one of the best ways to streamline operations and reduce Accounts Payable costs. However, your company may still be wondering whether converting to electronic payments will provide a return on your investment. In order to answer that question, you need to consider industry trends, barriers to converting to electronic payments and potential solutions.
Converting to Electronic Payments: Industry Trends
The Association for Financial Professionals (AFP) studied industry trends and published the results in their 2016 Electronic Payments Survey. Annually underwritten by JP Morgan, the survey uncovers a number of useful facts. For example, they reported that companies who have converted to electronic payments experienced the following benefits:
- Cost savings were cited by 51 percent of respondents
- Speed of settlement increases was cited by 48 percent of respondents
- Improved cash forecasting was cited by 46 percent of respondents
- More efficient reconciliation was cited by 36 percent of respondents
- Fraud control improvement was cited by 35 percent of respondents
- Better supplier and customer relations was cited by 35 percent of respondents
- Straight-through processing to AP or AR was cited by 33 percent of respondents
- Working capital improvement was cited by 24 percent of respondents
- Ability to take early pay discounts was cited by 21 percent of respondents
- Reduction in days sales outstanding was cited by 14 percent of respondents
It’s difficult to compare cost savings among companies because their cost structures and processes are so different. However, individual companies do measure and report cost savings. In general, the savings come from the fact that electronic payments are much less expensive than manual processes that require buying paper checks, printing, stuffing envelopes and postage. Faster payments with defined settlement times make cash forecasting easier too.
Another report published by the Accounts Payable research firm PayStream indicates that, when asked about taking early payment discounts, 16 percent of respondents report never capturing the savings, 33 percent report that they always capture the discounts and 51 percent respond that they sometimes capture the savings. Based on those statistics, it’s obvious that there is a great deal of potential for reducing costs by capturing these discounts.
Barriers to Converting to Electronic Payments
The key barriers cited in the AFP report include:
- Shortage of IT resources for implementation – 77 percent of respondents
- Difficulty convincing suppliers to accept electronic payments – 76 percent of respondents
- Lack of integration between electronic payments and accounting system – 69 percent of respondents
In order to take advantage of the benefits of using electronic payments, you’ll need to choose a solution that provides the following features:
- Elimination of 100 percent of your paper checks and related processing costs
- Ability to process a variety of electronic payment options, including ACH, credit cards or various types of domestic and global payment vehicles
- Low to no requirement for involving your IT department
- Vendor transition management services using an organized supplier enrollment program
- A variety of data integration options
This type of solution will reduce or eliminate the barriers to conversion mentioned above. Your company will be able to take advantage of the cost savings and process improvements electronic payments provide.
Find out what type of costs savings you can realize by working with ACOM. Try out our ePayables ROI Calculator to do your own calculation. What you’ll find is that if you process 100 checks per month, your savings would be approximately $6,000 per year. If you process 1,000 checks per month, your savings would be approximately $60,000 per year. What will your savings amount to? Schedule a free demonstration to explore your options.
If you’re ready to convert to electronic payments, the experts at ACOM can help. Call us at 800-347-3638, or contact us online.