Still using checks to pay the bills? Still getting paid mostly by checks? That payment method has been in use for centuries but it is rapidly being replaced by electronic debit payments and ACH transfers. ACH stands for Automated Clearing House. It’s an electronic network in the United States that processes large volumes of credit and debit transactions. ACH transfers are made available by your bank and include direct deposit, payroll and vendor payments.
Chances are you’ve had direct deposit for many years and can’t remember tearing open your last paycheck envelope and running to the bank whenever you could get there. Some of you reading this might never have needed to “tear open a paycheck.”
Why Keep Waiting?
If your company is still paying or getting paid with paper checks, then you and your vendors probably know what it’s like to wait 3 or 4 extra days for money to be available from your accounts receivable after the payment is made (“the check is cut”). Mailing the check, receiving the check, and depositing the check – with the 24-hour + hold for the money to clear – adds several days to the whole payment process while funds from most electronics payments are made available in 24 to 48 hours with just a few clicks & keystrokes.
When you stop to think about it, using a physical paper system of transferring what is really going to be a digital record anyway doesn’t make sense anymore. Think of the energy expended producing, processing and physically transporting a small piece of paper hundreds, or maybe thousands of miles through air and on land to reach its destination. Then there’s the energy required to physically get that paper to a bank where it will go through more processing… finally the money. Whew! What a trip just for one payment!
Many businesses are discouraging payments by check and encouraging online electronic payments and direct ACH processing. Even small businesses don’t want checks anymore and are willing to absorb merchant services fees without giving it much thought. Ask a Millennial business owner how they normally get paid and how they pay their bills. The words “check” and “check run” are probably absent from their business vocabulary.
See where we’re going here? None of this payment paperwork is necessary in a digital age yet it still persists. Perhaps it’s finally time to make check writing an “only when necessary” practice. As author Kelly Atchley writes in her March 2, 2017 blog article, “…now is the time to automate and migrate away from manual processes and check payments.”
Consumers are driving much of the growth in electronic payments as credit and debit cards take over paper based payments. From Federal Reserve data, NPR.org reports that in 2012, 21% of all payments were made by credit card, 38% by debit card and only 15% by checks. Going back to 2003, a whopping 46% of all payments were by check, so we’re certainly moving in a totally paperless direction when dealing with AP automation and merchant payment processing.
ACH payments have been steadily on the rise, growing from 11% of payments in 2003 to 18% in 2012. Clearly, the numbers in electronic payments have grown steadily since the Federal Reserve issued this report in 2013.
Getting with the Times
As consumers drive trends, business entities often lag behind in harnessing those technologies that both consumers and businesses can utilize, but they always catch up. Anything that will make a business run more efficiently will get a high priority rating. Paying the bills and getting paid shouldn’t be any different.
Automating your AP department and migrating your payment processing to paperless systems at the same time will go a long way toward speeding cash flow. Additionally, it will significantly reduce the labor needed to process payments coming in and going out.
For the near future, accepting checks as payments and paying by check will continue where needed but those old paper processing systems are being dismantled as the demand for fully digitized commerce grows.
AP Automation can be your best front end approach to streamlining your accounting function by making all of your AP data paperless and integrating it seamlessly with your ERP system.
NEDocs offers Vision 360 AP Automation software and support to fully automate your AP process, putting you in better control while eliminating all that front end invoice processing. To learn how it works, click here or call one of our AP Automation specialists at (603) 625-1171.