Data from a recent survey by PayStream Advisors indicate that while companies are increasing the use of electronic payment methods, 71 percent of indirect spend and 78 percent of payment transactions are still processed via checks.
However, using electronic payment methods can provide significant advantages to a company, says Eithne G. O’Malley, vice president, senior disbursements product manager for PNC.
Smart Business spoke with O’Malley about how electronic payables processing can provide significant advantages to companies of any size as they struggle to lower costs and improve efficiency.
What are the drawbacks of a company continuing to do paper check processing?
The cost of processing paper checks is already high, and it is expected to increase. The process is also inefficient, and it increases the risk of fraud.
In addition, it ties up valuable human resources that could be devoted to other activities.
Even organizations with good business reasons to maintain a paper check system should consider improving their mix of payment types to help increase efficiency and lower costs.
What are the advantages of a company using electronic systems to process payments?
Electronic systems have significant advantages, not the least of which is preparation for the future. It won’t be long before your vendors will expect to be paid electronically, and chances are that your competitors are already benefitting from the cost efficiencies inherent in electronic payment.
Electronic payables can increase visibility and enhance cash flow forecasting and risk management, while reducing losses due to fraud, theft of checks and data entry errors.
These systems also make it easier to capture early payment discounts and can improve your company’s cash flow.
In addition, many companies find that electronic payables actually increase employee satisfaction because they allow staff to make better use of their time.
Once a company has decided to reduce or eliminate the use of paper checks, how does it go about making the transition to electronic payables?
First, you need to lay out the business case for making the change. Pull together the facts and figures you need to convince both your own management and your suppliers that the switch will be a win-win for everyone.
Second, initiate a pilot project. This will help both internal and external partners understand the benefits of the change.
Third, use the pilot project to evaluate the pros and cons of the new system and to make improvements.
Once the new system is in place, you should continue to evaluate and make improvements to it to ensure that you are maximizing both the cost and security benefits.
