In the first part of our ePayments series, we looked at how the ugly ducklings of Accounts Payable have been evolving and now emerge as rather handsome ducks, as they have taken the form of the much more efficient and profitable electronic payments. This blog will follow on from there and start to take a look at how and why ePayments have started to grow wings, as well as what sort of obstacles there are in the way of enterprises implementing ePayment approaches into full flight.
Historically, the back-office functions of accounts payable have always fallen short of being considered true strategic operations, and, as such, have for the most part been ignored (or at least set aside) by CFOs, whose time, it was thought, was more valuably spent concentrating on nurturing other nestlings. Not so anymore. Indeed, for the U.S. market, it has been shown that switching to an ePayment program can save a company over 70% per payment processed, over the alternative method of paper-based checks.
Other benefits include:
- Enhanced speed of payments
- Improved visibility of spending and cash flow
- Gap between procurement and finance is bridged
- Increased accuracy and delivery of payments
The savings alone should be enough to convince CEOs and CFOs alike to start spreading their wings and finally fly away from the age-old, much-flawed payment processes of checks. However, there is still a general reluctance that seems to unsettle some of the key decision makers (as mentioned in Part 1 of this series, only 28% of payments currently completed are done so via electronic means), and indeed there are still some obtrusive barriers in the way of a more large-scale electronic payment adoption initiative.
So, what are the barriers?
Onboarding Suppliers: There seems to be a general difficulty in persuading key players in the supply chain to accept ePayments as a means of settlement. There is a perception that implementing ePayments into a business framework is costly. While making such a dramatic change to the way a business is run, of course, incurs a certain outlay in the setting up phase, this should rather be seen as an investment – for the money saved will offset this initial cost in the long run. However, SMEs without the capital to invest in the move are nevertheless reluctant or just simply unable to get on board.
Remittance Information: There is also a certain level of uncertainty regarding the depth of remittance information made available throughout the ePayment process. There is a very high value placed on all data regarding cash, and so enterprises are (quite rightly) concerned about the business intelligence that they fear may be lost by implementing the switch. This is something that needs to be standardized if ePayments are to make the significant impact that they really should be.
Reluctance To Give Up On Checks: We really are creatures of habit, aren’t we? 72% of all payments in the U.S. are still processed from good old paper-based checks. Checks, it seems, are an accepted part of the standard corporate payment process – they’ve been in use for years, we all understand the method, why should we change now?
This last point in particular is perhaps the most pressing (not to mention depressing). It’s not just a culture, but a collective attitude that needs to be changed – and that could take some time. Indeed, despite all the recent research that has gone into highlighting the strategic importance of Accounts Payable (AP), it seems that the general attitude remains that AP is still thought to be a non-strategic factor in the world of financial operations, and that optimizing payments could not lead to additional profits.
This is unfortunate – quite literally, actually – for your business, and those in your supply chain could be saving and creating new fortunes by making the moves to ePayments. True, as outlined above, there are still barriers to overcome, and a potential initial outlay of investment that may temporarily put an unwanted dent in your capital, but with a 70% savings per payment processed, the move to faster, safer, smarter and indeed richer transactions as made possible by ePayments is surely the only realistic long-term option.