The Case For Phasing Out Checks For Good

George Green

A McKinsey global survey of executives revealed that the pandemic has accelerated the digitalization of their companies’ internal operations by three to four years, and the share of digital or digitally-enabled products in their portfolios has advanced by seven years.

However, in finance, there is a legacy process that remains resistant. Checks are still the primary payment method in B2B payments, accounting for 40% of all transactions. This stands in stark contrast to the digital experience today’s organizations are striving to build.

Check Payments Prevail

It’s hard to make check payments redundant. Many operations in accounts receivable (AR) and accounts payable (AP) are designed with checks in mind. ERPs are set up with checks as the default payment method and the economy is underpinned by a banking system that has built itself around making check payments simple.

Katherine Weislogel, Head of Treasury & Payment Solutions for Synovus Bank, explains a common organizational challenge. If you look at the back office, the tenure of the people in it who use paper payments can often span 30 to 40 years. They have less desire to move away from traditional methods. They know their workflows and they have established ways of working with their customers. 


It's Time For Checks To Check Out

For all the benefits of checks, there are significant drawbacks. A single check costs $4 to $20 to process and businesses in the US spend almost $160 billion a year to send and receive paper invoices and payments. 

They’re also a target for fraud. Last year, 66% of organizations were subject to attempted/actual payments fraud when using checks. This is significantly more than wire transfers (39%), ACH payments (19%) and credit cards (24%).

And they’re slow. Mailing checks can cause lots of issues: they clear 5-10 business days from when they are sent out, they can get lost, and delays are common. 

However, these problems are not the impetus for change. They have always existed. It is today’s world of hybrid working that is driving the demand for a digital payment experience. 

During the pandemic, the paper check was no longer viable in a work-from-home environment. Both AP and AR professionals experienced unusual work routines, making it difficult to cut or receive checks as they normally would. As 83% of professionals want hybrid working to become the norm, more organizations are building flexible practices to help employees and customers manage their roles effectively, regardless of where they prefer to be based.


AR's Digital Shift

A large majority of businesses –  70% – plan to automate their AR and 83% of firms have changed their processes since the impact of COVID-19. As more companies embrace digital transformation, they are recognizing the advantages of providing flexible options, increased efficiency and improved security. 

AR automation offers a range of payment options, from ACH to cards. Today’s customers want to pay you in the same way that they pay for everything else – online. Moving away from checks and providing customers with flexible digital options means you get paid faster, which helps improve days sales outstanding (DSO) and accelerates cash conversion.

Cross-border payments are set to grow 30% by 2022, which means the speed of digital payments is crucial. With AR automation, customers benefit from a richer, self-service experience that allows them to access account details, make payments and submit requests - at any time and from anywhere. Not only is this transformational for them, but your employees will gain valuable time back to focus on priority activities. 

Implementing an automated solution can be simple with the right partner. YayPay, a leading AR automation provider has established relationships with merchant service providers (MSPs). These providers issue customers with a merchant ID number (MID) which can then be integrated into their ERP system. Once the MID is integrated into the ERP, the customer can use the self-service model to perform tasks such as processing payments. The MSP pulls it all together, managing the back-end functions such as customer account verification, depositing the funds into your account and completing the transaction.


A Zero-Touch Payments Process

Meeting financial goals can be an equally tough challenge for AP teams, especially when they are working remotely or in a hybrid setting. Instead of spending time on tasks such as financial reporting and managing cash flow, they end up chasing approvals and payment information. It becomes a bigger challenge when workflows are stored in separate systems – like DropBox and emails – causing delays and data silos. What’s worse, no one can ever be sure where payments stand.

31% of businesses quote payment processing time as a major challenge. A report by Deloitte found that it takes an average of 30 days to complete a single payment, and around 47% of the suppliers are paid late for their products or services.

In the era of technology and AI, automation gives businesses real-time updates and clear visibility into the payment cycle. With an AP automation software such as Beanworks, payments can be made in a few clicks. Accountants receive invoices electronically, send them for approval online and managers can accept or reject on the central platform. Once approved, payments are processed based on the vendor’s preference – ACH/EFT, e-checks or virtual credit cards (VCC). What’s more, global payments are handled with ease, without involving the IT department or making frazzled calls to banks and vendors.  

A Frictionless Payments Experience

Driven by both AP and AR, the shift toward faster, contactless payments is poised to shape the future. The freedom to accept and make payments, locally or internationally with convenient, easy-to-use platforms is a game-changer in the work-from-anywhere economy. In the past, businesses had to go through expensive and time-consuming gateways to pay vendors. Now, automation is simplifying this in a way that benefits both parties - the business and the customer. With the right tools, CFOs can move their finance processes forward while reaping the benefits of better insights, and a scalable future.