How many of your customers are currently submitting their B2B invoice payment via check, and how much do you think it’s costing you?
It’s estimated that more than 50% of businesses still pay with a paper check, and according to Bank of America, the cost to process a paper check can be as low as $4 or as much as $20! When you consider how many checks you’re receiving from customers each year that can really add up no matter where you fall in that range. Here’s the good news, you can reduce these costs by eliminating the labor and the paper involved with electronic invoice presentment and payment; or in other words, allowing your customers to pay you via credit card or ACH transactions online.
The cost of paper processes: Many studies suggest that the business cost associated with processing customer payments via check can represent 90% of the true costs which most businesses never consider. For example, one study suggests that companies invest approximately 260 hours to process 450 invoices monthly when they include the time it takes to prepare the invoice, record the receivables, reconcile payments, and time spent making bank deposits and pursuing delinquent accounts. That’s the equivalent of about 1.5 full time employees with an estimated annual cost of about $45,000 to send invoices with $41,000 of that directly related to labor.
By comparison, it’s estimated that the costs associated with electronic payments can be 30% to 60% less with considerable savings in labor. Study after study confirm that electronic payments are much more cost effective than paper checks with another study estimating 50% savings in electronic payments compared to check payment processing. Beyond costs savings, there are other benefits of electronic invoice presentment and payment (EIPP), for example:
Security: According to the Association for Financial Professionals, fraud is much more prevalent with checks than electronic payments, with 85% of fraud cases associated with checks compared to just 28% with ACH.
Faster invoice collection: If you think about it, when invoices can be sent and money can be collected online, you reduce the time it takes for the postal service to deliver the invoice/check on either end of the process. That is why accepting credit cards and ACH transactions online can shave several days off the order to cash cycle time, improving your overall cash flow and working capital. Further, any complications that might lengthen the payment process are kept to a minimum. For example, electronic payments have a much lower chance of failure compared to paper checks that have a much higher insufficient funds rate.
Related reading: 5 Reasons to Study Up on AR Management Automation
Making the change is not as easy as maintaining status quo, but change is never easy and it’s well worth it when you can save thousands of dollars and hundreds of hours, improve cash flow, and make it easier for your customers to pay you. Learn more about the benefits of EIPP and how to get started in the guide below.
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