Is it finally time to abandon checks?
Bottom line benefits of electronic payments far outweigh the barriers to abandoning checks.
Status quo is comfortable and safe. Its the familiar trail – you know its perils and pitfalls. You can predict where problems may pop up and most of all, you know how to avoid them to ensure success.
There’s just one big problem – staying with the status quo could leave you on a dusty country road writing paper checks while your competitors are zooming down an electronic payments super highway. One where they are spending less and delivering payments faster. Good luck catching up.
Status quo is one reason given by financial experts on why 51% of B2B payments are still made by check in a 2016 study.
Taking It Slow
In that same study by the Association of Financial Professionals (AFP), 70% of 2016 respondents believe that it is very or somewhat likely that their organizations will convert the majority of their payments to electronic within the next 3 years.
While there is optimism – and acknowledgement – that switching to e-payments is where organizations are headed, the barriers have proven to be higher than originally thought. Among the top barriers cited by respondents (who could choose more than one answer) were:
- Shortage of IT resources for implementation (77%)
- Difficulty convincing suppliers to accept electronic payments (76%)
- Absence of standard formats for remittance information (71%)
- Lack of integration between electronic payments and accounting systems (69%)
Bottom Line Benefits
The potential for substantial cost savings has been the driving force behind electronic payments adoption for many financial professionals.
There are numerous estimates on the cost to issue a paper check. AFP places it at a median cost of $3.00. Other businesses estimate their costs range from $1 to $26 dollars, with an average cost of $5.91 per check. Bank of America states that a business check can cost between $4 to $20 dollars, while the Aberdeen Group reports $7.78 as the average cost of a check payment.
Taking the very reasonable $3.00/check median cost estimated by the AFP in their 2015 Payments Cost Benchmarking Survey, an organization that issues 20,000+ checks a month is spending $60,000 a month or $720,000 annually. And the costs don’t hit just the sender’s bottom line; an organization receiving 20,000+ checks per month spends a median of $1.50 for each paper check received.
That’s 10 times more than the 29 cents quoted by AFP as the cost to send electronic payments, and 5 times more than the cost to receive an e-payment.
While these are aggregated estimates, your organization may be unique. Watch for our next blog, with a comprehensive listing of the numerous obvious and hidden costs involved with check issuance.