Are ACH Payments Becoming the Middle Ground for A/P and A/R?

Wed, Aug 02, 2017 @ 02:46 PM

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Automated Clearing House (ACH) transactions have seen a significant increase in B2B Payments from past quarters. It comes as no surprise as ACH offers value added benefits over paper checks. If A/P and A/R departments can send and receive payments faster, lower costs and increase cash flow, why not make the switch from paper to electronic payments?

A/P needs digitalization

Accounts Payable departments time and tasks are spread thinly. A great amount of that time is spent manually handling paper checks. The disadvantages of paper are keeping staff busy with searching, sorting, filing, collating, entering data, fixing data, searching again and everything in between. It’s frustrating, and A/P professionals would rather allocate resources to more strategic elements of managing the business finances, calculating profits, and reducing expenses.

When calculating the time spent with manual processes over the course of a week, month, let alone a year, it becomes a high labor cost for any company to bear. Stop wasting your employees time and your company’s money with outdated paper handling. Remove the risk, work, bulk, and pain from handling paper checks and increase the speed of funding with Accounts Payable automation.

A/P automation streamlines the A/P process, resulting in cash optimization, stronger internal controls, visibility, and satisfied customers. Automation offers payments via ACH, wire transfer, virtual cards, and e-checks. The most adopted payment method has been ACH due to its speed, ease, and commonality.  With ACH, A/P departments make timely payments and A/R departments get their money fast. It’s a mutual beneficial relationship for both parties.

Benefits of ACH

B2B Payments - Payment Automation - ACH Payments

The benefits of ACH have provided a solution to many A/P staff’s pain points and concerns.

  • Lower transaction fees
  • Convenience
  • Auto invoicing
  • Preferred funding over paper checks
  • Faster payments
  • Same day payments

When your company adopts A/P automation and ACH payments, you’re doing your customers A/R department a huge favor- they’ll receive funds faster, and you now have a clearer view of cash flow.

A/R needs faster payments

Per a study from Dun & Bradstreet and the Pepperdine Graziadio School of Business and Management, small to mid-sized businesses have shared that accounts receivable has slowed in the last three months, as corporate buyers lengthen payment terms to hold onto cash longer. Researchers noted that slow A/R negatively affects a company’s ability to grow, especially for the smallest of businesses.

Accounts Receivable automation can help businesses better understand their cash position and more accurately forecast cash flow. More enterprises are implementing some form of electronic payments into their infrastructure for the future.

But while the underlying accounting infrastructure may be embracing technology, the payment itself remains slow, with paper checks still posing a major challenge both to A/R professionals’ needs for faster payments and A/P professionals’ needs for digitization.

Per PYMNTS.com, a survey released by NACHA last month, along with the Credit Research Foundation, found that A/R professionals are experiencing an uptick in the number of payments they receive via ACH, while check payments appear to be going down. Indeed, the report found that while checks are more common than ACH today, by 2020 checks are expected to decline to 34 percent of all payments received by the A/R department. At the same time, ACH is expected to make up 45 percent of payments, with increases in card payments, too.

ACH has become the middle ground

While A/P professionals look to technology to make their processes more efficient, and A/R executives seek electronic payments to help their organizations get paid faster, it makes sense that ACH is quickly becoming the middle ground between the often-conflicting sides of B2B payments.

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