Electronic payments—fast, efficient, and protected
As remote operations caused by COVID-19 limited access to office systems and the paper that supported them, businesses are finally moving to more efficient, faster, and cheaper electronic payments. Divorcing paper from business processes has long had appeal, but with no one in the office to cut checks, grab mail, and deposit receipts, the versatility afforded by electronic processes became a requirement.
While remote processing flexibility has gained in importance, a fundamental driver behind electronic payments is the optimization of working capital.
“The electronic means to make a payment gives companies an improved ability to manage their working capital,” said Tim Mueller, head of Treasury Solutions Product at Truist.
Businesses using electronic payments can see immediate fulfillment of payments, less paperwork and staff hours required, timeliness, traceability, and avoidance of mail delays. Rebates, discounts, and extended terms become much more accessible. Ultimately, electronic payments give companies an improved ability to manage their working capital and overall capital productivity.
According to the 2020 AFP Payments Fraud and Control Survey, the move to B2B electronic payments is far from over.
Behind the movement to electronic
The shift from manual to electronic payments has continued at a steady pace. During the past three years, check payments dropped 7.2% annually with electronic methods like credit and debit card use growing 8.9% annually and ACH payments growing 7.2% annually, according to the 2019 Federal Reserve Payments Study. While COVID-19 may be the recent catalyst, the fundamentals behind digital transformation are powerful and pushed by societal, financial, and technical forces.
- Financial processing efficiency and lower costs – The internal costs of invoice processing and payment generation are the engine behind payment mix changes. Best-in-class performers took only 3.1 days to process an invoice at a cost of only $2.56 versus $10.89 on average. To get these savings, they handled three times more invoices electronically, and they electronically linked almost twice the number of invoices to purchase orders as all others.* Businesses gained greater visibility into payment data, staffing efficiencies from simplified payment processes, and reduced fraud risk.
High cost of invoice processing
- Better reconciliation information attached to electronic transactions – Digital transactions can carry additional embedded data with specifics about the underlying customer or product and service delivered. According to the 2019 Electronic Payments Survey report, 54 percent of businesses noted the importance of extensive remittance information in considering electronic payments. Additional data can drive the benefits of automation and help companies achieve an increased return on their investment in automating financial processes.
- Recipient’s preference – Payors almost always want to hold onto their funds as long as possible and use the payment methods most convenient for them. For years, the burden has been on the payor to educate the recipients on the savings and benefits of electronic payments and encourage them to invest in the systems to go electronic. Now, with a push from the COVID-19 crisis, the pendulum may have swung as electronic payments are being demanded by recipients who need electronic payments to operate remotely.
- Demands for speed and real-time payments – The drive for speed is a constant in business improvement and technological progress. According to the 2019 Electronic Payments Survey Report, 60 percent of businesses cite speed a top benefit of using an electronic payment system. In today’s world, action is expected at the click of a button. B2B payment transactions are no exception.
|Cost to process a single invoice (all-inclusive cost)||$2.56||$10.89|
|Time to process a single invoice||3.1 days||10 days|
|Invoice exception rate||10.6%||24.6%|
- Comfort with all things digital – Today’s workforce is generally more comfortable with all things digital. Information is available as easily on mobile devices as desktop computers. As new financial managers take over key business roles, they'll have little patience for fraud-prone and costly checks and will look to replace them with electronic payments.
- Reshaping the fight against fraud – The fight against fraud looks different in the electronic world. There are unique vulnerabilities, developed fraud schemes, and different fraud prevention tools. Faster electronic payments add challenges to fraud detection. In a crisis, limited staff and data accessibility can disrupt normal monitoring, reporting, and control functions that usually identify risks and signs of fraud at work. Phishing and social engineering schemes thrive on disruption and catching people off guard.
Make electronic payments happen
Electronic payments offer the promise of faster funds movement, better tracking, improved security, more data transferred, and less of your financial staff’s time. There's a wide range of electronic payment strategies businesses can use.
- Purchasing/virtual card
- Automates vendor payments
- Integrates with enterprise resource planning (ERP)
- Reduces exception processing
- Standard ACH and same-day payments
- Delivers additional data with electronic data interchange
- Provides direct deposit of payroll
- Offers same-day or future settlement
- Consolidated payments file
- Supplies single source execution of check, card, ACH, and wire transfers
- Creates online accessibility of payment remittance data for vendor
- Reduces internal costs and payment fraud risk
- Wire transfer
- Executes via online banking
- Supports same-day or future settlement
- Eliminates payment uncertainty
Truist looks forward
The demands for increased processing efficiency and tighter control over working capital point to greater use of automation with electronic transactions. Truist has a vision for electronic payments, an understanding of a business’s payment needs, and the commitment to deliver. Truist brings an even more effective payment experience with multiple payment options—online banking, treasury workstation, a business’s accounting platform or ERP, or by application programming interfaces.
Make the move to electronic payments
Talk to your relationship manager or treasury consultant to discuss your business, its plans, and its payments needs. Whether you're seeking capital, working on financial systems, exploring strategic options or securing your and your family’s future, Truist is here to support you and your business.
*2020 AFP Payments Fraud and Control Survey, 2020.
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This material is intended for informational purposes only and should not be construed as legal, accounting, tax, investment, or other professional advice. Past performance does not guarantee future returns. This material may include estimates, projections and other "forward-looking statements." Due to numerous factors, actual events may differ substantially from those presented.
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