B2B Payments

How Banks Can Knock Checks Off Their Throne

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“The check’s in the mail” has become the epitome of B2B payments failings. Indeed, 100 percent of companies surveyed by Viewpost in its latest report said they still use paper checks to pay their invoices.

But, as found in The Check’s No Longer In The Mail Study, released by Viewpost last week, electronic payments continue to rise and, as they do, so do the frustrations that come with the excuse, “the check’s in the mail.”

In its research, Viewpost asked companies what their “gut reaction” to that enduring excuse was. The most common, cited by nearly 37 percent of survey respondents, said they wished there were a mechanism to allow them to track that paper check in the mail the way they can track a package. But nearly a fifth said their first reaction to the excuse is to call the payer on its bluff and request a check number by phone to ensure that the check really is in the mail.

Suppliers facing this challenge are also banding together. According to Viewpost, about a fifth of suppliers said they turn to other suppliers and ask whether their peers have had similar experiences with the “the check’s in the mail” excuse. Others say they charge interest on late payments, and still others say they halt services or stop shipment to buyers that pay late.

 

Why Sluggish Checks Endure

Late payments are undeniably a headache for suppliers. But Viewpost‘s latest report uncovered an array of factors behind why the paper check endures and why the late payments plague continues.

Every single one of the business owners surveyed by Viewpost said they continue to write paper checks to pay suppliers. The most common reason? Their suppliers don’t accept electronic payments, according to 41 percent of survey respondents. But a lack of hidden fees, the easily tracked paper trail and the ease of use associated with checks are all top reasons they have persevered.

And while paper checks are considered favorable among corporate buyers because they allow firms a few extra days of float before their money leaves their bank accounts, just 1.8 percent admitted this as the top reason they use paper checks.

Another key reason why the paper check stays strong: Suppliers aren’t always concerned about getting paid.

According to Viewpost, nearly 75 percent of entrepreneurs surveyed said there were more important things about their business than getting paid. Nearly half said doing a good job is more important, while adequate training, recognition and proper management were also cited as priorities other than getting paid when it comes to work.

 

Electronic Payments On The Rise

While every one of the business owners surveyed by Viewpost said they still write checks, that doesn’t mean electronic payments are absent.

According to the report, on average, entrepreneurs say 37 percent of their payments are paid via check. But coming in close behind are electronic payments, which account for an average of 35 percent of their transactions.

Credit cards on file account for another 16 percent, and debit cards account for 4 percent, surpassed by cash (6 percent) but ahead of wire transfers (2 percent).

Nearly three-quarters of professionals surveyed said they use some form of electronic payment, with nearly a third reporting that they have migrated to both electronic payments and electronic invoices. More than a quarter said they have only moved to electronic payments, and over a third said they are at least in the planning stages of migrating to electronic payments.

Most entrepreneurs said electronic payments mean a higher level of confidence with their job performance, with other suppliers and with hiring and making purchasing decisions. Faster and more efficient bill pay is the top motivation for migrating to electronic payments, those surveyed said, while 24/7 access to payments information is also a top benefit.

Viewpost highlighted a significant opportunity for financial institutions to encourage the adoption of electronic B2B payments: Most entrepreneurs said banks could entice them to open new accounts or switch banks if they offered electronic payment and invoicing services.

In a statement, Viewpost CEO Max Eliscu said all of this data signals the need for education among corporates when it comes to their money management needs.

“Our survey data clearly shows that traditional invoicing — and the entire antiquated, old-school payments process — are a big pain point. Quite simply, businesses must have greater knowledge and deeper visibility when it comes to cash flow management,” he said.

But with businesses ready to flock to the financial service providers that offer electronic payments and billing, there is evidence that entrepreneurs understand the benefits of such tools and simply need the right incentives to make the switch.

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