Have you ever asked yourself when you last paid a personal bill online? If you are like most people, it was probably much more recently than the last time you mailed a check. Even though the concept of paying bills with paper remittance is quickly dwindling among individuals, most businesses still prefer mailing checks when paying vendors and service providers.
Checks may be dying everywhere else in the world (and declared dead outside of the U.S. a long time ago), but they are alive and well in B2B payments land. Billions, yes billions, of checks (worth tens of trillions of dollars) are written each year by buyers and sent to suppliers to settle invoices. Why? Well, believe it or not, as archaic as paper checks are in this new digital age, they are pretty easy for buyers to issue, and the corporate systems—as painful, manual, expensive, and inefficient as they are in many cases—are set up to handle them.
Changes in Technology
Current technologies offer many options for electronic invoicing and banking, which means there is a steady increase in the number of payments that are being paid electronically. In spite of the growing popularity of electronic payment processing, the majority of businesses have not yet embraced it for B2B transactions. In 2010 the Federal Reserve conducted a survey of B2B remittance practices. The result of the study showed there was a 53% increase in the number of paper remittances businesses issued for payment between 2000 and 2009.
With the availability of B2B electronic technology for processing vendor remittances, why aren’t more businesses taking advantage of this technology? The answer appears quite obvious—writing a check appears easier than processing an electronic transaction, and having a physical paper trail means the data exists somewhere that an individual can find. The reality is that the majority of business accounting systems do not tie in with corporate banking information systems, so companies find it easier to print physical remittances instead of having to enter the payment information into the bank’s website again and again.
One of the biggest problems with online payment options is the customer’s concerns about security and loss of data. This concern is possibly the reason many business owners avoid taking advantage of electronic transfer of funds for remittances to vendors.
The problem is not necessarily a real one, but rather a preconceived notion of business owners concerning security issues surrounding this new technology. There may also be a lack of knowledge concerning vendor preferences for B2B transactions. In truth, paper checks are not as secure as computerized payment options. It is much too easy to forge signatures, change dollar amounts, and payee information. Business owners should keep this in mind when deciding how to handle B2B transactions.
Making a Decision
Business owners who are trying to determine the best way to process B2B transactions should speak to their own customers first in order to assess their willingness to accept different methods for making remittances. While security is important, business owners must also remember that all remittance methods hold some degree of risk and require the implementation of safety measures, and to react accordingly.