The adage “if it ain't broke, don’t fix it” really only works in specific scenarios.
It’s a good rule to follow for things like lawnmowers, cars, and electronics, but what about B2B payments? What if something is functional but not optimal? What if your current processes work okay, but they cost you precious time and resources?
In today's blog post, we'll dive into the benefits of AP automation and why change can be a good thing.
The landscape of B2B payments and payment automation has changed drastically over the last 15 years. A recent article written by the AFP Exchange outlined that the percentage of B2B payments made by checks has gone down from 81% in 2004 to 42% in 2019.
That’s a HUGE shift, and it indicates that the majority of businesses are starting to understand that moving away from paper checks as a primary B2B payment method not only saves on costs but also improves security by protecting against fraud and increasing revenue.
Businesses are eliminating paper checks from their B2B payment processes at a rate of 2.6% a year. Experts expect things to intensify in the next few years, but even if they don't, that means in 10 years, only 16% of businesses will be using paper checks for B2B payments, and by 2036 paper checks will be obsolete.
Nevertheless, for the time being, 42% of businesses in the world continue to utilize paper checks for B2B payments. So, the question remains, why are so many companies hesitant to move away from paper checks in favor of electronic payments permanently?
Research shows that there are 5 Primary Fears/Myths that keep AP Executives and Professionals in finance from fully transitioning to accounts payable automation and electronic payments. The driving force behind the reluctance to embrace new processes and technologies stems from hesitation to leave behind established methods and perceived difficulty associated with change.
AFP recently wrote, “Even though checks are slower to process than electronic payments and more susceptible to fraud, they continue to dominate B2B transactions, signaling the challenge in changing internal processes. Other barriers organizations [fear they] face in moving away from checks are increased costs of moving to alternative payment methods and lack of IT resources, as well as difficulty convincing business partners to shift toward sending/receiving electronic payments rather than checks. In addition, the relatively high level of integration of checks in corporate accounting systems, as opposed to electronic payment alternatives, contributes to their continued usage."
AFP goes on to say, “Although new technology is appealing, treasury and finance professionals tend to stick with what works for them, and their vendors. Check payments and wire transfers have been around for a long time for a reason. That said, it’s encouraging that check usage is in decline, as electronic payment methods are much more efficient, and have a much lower risk for fraud.”
Change can be hard to accept at first, but in business and life, it is necessary for our continued success. Transitioning away from paper checks to electronic payments immediately, positively affects a business's bottom-line. In 6 case studies taken from businesses in different industries, every company reported positive growth and improved efficiency after automating their AP process.
Principal financial officers within their organizations all agreed that:
- Moving away from paper checks saved an average of 80% on costs alone.
- Their payment automation solutions provider handled the bulk of the IT work themselves, allowing the AP Department to focus on what matters - managing finances, not managing mountains of paper.
- The vast majority of their vendors would prefer to receive electronic payments for the expedited access to funds and security while maintaining their ability to choose their preferred payment method.
- Their chosen B2B payment automation solutions provider created payment automation software that seamlessly integrated with an existing ERP or Accounting System.
In any business vertical, it’s crucial to remember that no two companies are exactly alike. That’s why finance professionals need to find a payment automation solutions provider that fits their company perfectly.
It's not enough to settle for old processes anymore. Change is inevitable. In the near future, paper checks will no longer be a factor in B2B payments. In finance and technology, companies must stay abreast of new technological developments or risk getting left behind. It's becoming increasingly more dangerous to give competitors in this space a two or three-year advantage.
Albert Einstein famously said, "The definition of insanity is doing the same thing over and over again and expecting different results." Fear of change is essentially the same as being afraid of fear itself. Finance and B2B Payments are always changing and always adapting. Finance professionals have no choice but to change too.
Lastly, It's important to remember that change is good. The last Three Industrial Revolutions brought unprecedented improvements to the world. The Fourth Industrial Revolution is no different.
Originally published October 24, 2019. Updated for content & quality February 11, 2021.