This referenced posting comes from CPA Practice Advisor and its sub-title gets to the gist of the content; essentially, even though the pandemic has brought about companies’ desire to drop check processing as part of AP/AR, there still needs to be a reasonable business case presented to make the switch.
This is likely more applicable as organizations grow in size, but remains a hurdle. The author is a senior at a payments automation company. The piece has a couple of click through pieces that offer some additional insight as well, such as a brief history of paper checks.
‘Paying suppliers by check is a practice that has endured for much longer than anyone would have imagined. For a while, it looked like COVID-19 might be the tipping point for companies to go completely electronic. After an initial push in that direction, however, many accounts payable departments still send their workers into the office to process invoices and manage the manual check process….It’s not enough to want to get rid of paper checks. The case against them is not strong enough on its own. It has to be combined with a strong business case in favor of something else.’
So as Mercator Advisory Group has pointed out in prior commentary here and in member research, the pandemic is a catalyst for change, and has greased the wheels for further acceleration of digital financial processes. However, there are reasons that companies still hesitate, as the author points out.
‘Even though manual processes are expensive, there are some rational arguments for relying on check payments. You don’t have to enable suppliers for electronic payments, manage banking data, or worry about ACH fraud. You can even outsource the process. While suppliers generally like the idea of electronic payments, they can also be deterred by complex enrollment processes….People may also still be attached to the idea of check float. Even though interest rates remain at historic lows, it can provide a sense of security to see money in bank accounts for longer. Some businesses even have tenured employees who are used to older processes.’
The piece goes on to describe a framework for building a business case to digitize payments, using the four Es mentioned in the posting’s title, which are; Economics, Efficiency, Experience and Ease of Implementation. We like the mention of opportunity costs in the Economics section, since not only can the AP team be doing something more valuable with the time saved through switching from paper, but as we have been explaining in various discussions, digital processes also allow for the greater use of advanced technology such as AI and API integration.
The article is a good, quick read for interested parties.
’ Perspective is everything. It’s rarely enough to point out how to disrupt the norm–you have to paint a picture for a better future. When writing a business case for payment automation, draw attention to the permanently simplified (and cheaper) workload that automated processes would bring, rather than focusing on the temporary unfamiliarity of your solution. Keeping that kind of mindset may accomplish what years of manual effort have not: eliminating business check writing once and for all.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group