How to Convince your Suppliers to Abandon Checks
Electronic payments provide security, cost savings and speed
You’re ready to dump paper checks.
But your suppliers aren’t.
What started out as a marriage of convenience — they invoice, you send a check — is rapidly descending into a nightmare of security risks, high costs and inconvenience.
75%: Average percentage of organizations experiencing check fraud each year
Paper checks are expensive, insecure and inconvenient. However, paper check usage remains high, with many vendors reluctant to abandon paper check routines they’ve maintained for years.
Before you are tempted to divorce your suppliers over their love affair with paper checks, it’s worth investing some time and energy to understand how you can set your payments relationships back on the right track.
You’re not alone in your frustration about the reluctance to abandon paper checks.
B2B paper check usage remains stubbornly high despite the availability of safer, faster and cheaper electronic payment options.
51% of B2B payments are made by paper checki
While commercial paper check usage is declining, it is falling more slowly than expected. In fact, the Board of Governors of the Federal Reserve Board reported that commercial paper check usage declined 3.6 percent by the number of checks written and 3.7 percent by the value of the checks between 2015-2016. That follows an increase in the value of paper checks between 2012-15 of 2.2 percentii.
Fortunately, for every objection that suppliers muster in favor of continuing the paper check routine, there’s a persuasive counter argument.
|Familiarity||It's easier to keep doing what you've always done, even if it isn't particularly efficient.||The strongest proponents of check payments report the highest percentage of payment related challenges, including high processing costs, duplicate payments, missed discounts and fraud lossiii.|
|Workflows||Clear routines are established around paper check processing.||Establishing new routines around electronic payments cuts staff time wasted on manual reconciliation, chasing late payments and lack of payments visibility.|
|Security||Electronic data breach headlines reinforce supplier fears about switching to electronic payments.||Ironically, paper checks present a much higher security risk than electronic payments. Checks continue to be subject to the most fraud of all payment methods, according to the 2017 AFP Payments Fraud and Control Surveyiv.|
|Data||Concerns about exposing sensitive company data to counterparties||Cutting-edge electronic payments limit the amount of financial information exchanged between payers and payees and restrict payments by date and user.|
Electronic Payment Benefits
Don’t stop there – the advantages of supplier transition from paper checks to electronic payments are numerous, including:
• Cost savings: Electronic payments are 10 times cheaper than paper checksv.
• Speed: Checks stretch out the time frame from invoicing to actual receipt of funds by weeks. Electronic payments increase positive cash flow quickly, ensuring timely access to funds.
• Discounts: Dynamic discounting and other discounting programs provide a continuum of choice to suppliers in terms of receipt of funds and potential discounts available.
Great. But what are the best tactics to use to motivate suppliers to switch to electronic payments?
First of all, not all suppliers are created equally. While there is commonality among suppliers in terms of payment challenges, each supplier has its own payments ecosystem and struggles. Listen carefully and ensure full understanding of individual supplier objections and concerns.
Tailor the benefits of the electronic payments solution to specific supplier challenges. What matters most to the supplier?
✓ Cost savings
Partnering with an electronic payments vendor that offers a robust, flexible platform creates flexible, adaptable solutions tailored to individual supplier needs.
Offer a Win-Win Solution
Your suppliers are essential to the success of your business. By understanding their needs and crafting a faster, more secure and convenient electronics payment solution, you’ll strengthen your supplier relationships.
Your company wins with payments rebates, elimination of manual processes, cost savings and increased security.
Suppliers win with increased cash flow, quicker access to funds, elimination of manual processes and increased security.
If you’re ready to have a conversation about how Finexio can achieve that win for your suppliers, let us know.
i “2016 AFP Electronic Payment Survey,” Association of Financial Professionals, https://www.afponline.org/docs/default-source/registered/2016epaymentsreport-reg.pdf?sfvrsn=2&_n=5983
ii “Federal Reserve Payments Study: 2017 Annual Supplement,” The Board of Governors of the Federal Reserve Board,” Jan. 25, 2018, https://www.federalreserve.gov/paymentsystems/2017-December-The-Federal-Reserve-Payments-Study.htm
iii “2017 Electronic Payments Report,” PayStream, Jan. 18, 2017, https://www.paystreamadvisors.com/resource/2017-electronic-payments-report/
iv 2017 AFP Payments Fraud and Control Survey, Association of Financial Professionals, https://commercial.jpmorganchase.com/jpmpdf/1320732417358.pdf
v “Electronic Payments 10 Times Cheaper than Checks,” CFO.com, Oct. 12, 2015, http://ww2.cfo.com/applications/2015/10/electronic-payments-10-times-cheaper-checks/