The Accounts Payable Conundrum: Same-Day ACH Vs Checks

Accounts payable can be a contradiction showcasing the frustratingly slow pace of B2B payments digitization.

In PYMNTS’ Payables Friction Playbook, “Why Firms Are Ready For An AP Upgrade,” a collaboration with Corcentric, paper checks came out on top as the most widely used payment tool by accounts payable (AP) departments.

And yet, they’re also among the least liked by AP professionals, PYMNTS’ survey of 2,570 accounts payable professionals revealed. Only 63.5 percent of professionals said they are satisfied with using paper checks to pay invoices, a score that only beat out cryptocurrency (with less than half of survey respondents happy to pay invoices with crypto).

Even cash beat out checks in the satisfaction score, though not by much.

And yet, more than 80 percent of AP professionals say they use checks in their organizations to pay supplier invoices.

Even more confounding is the finding that the organizations with the greatest number of invoices processed by their AP departments — and therefore the firms with the greatest exposure to accounts payable friction — are most likely to stick to legacy B2B payments tools to settle their bills.

Organizations that receive at least 20,000 invoices a month are more likely than other firms to pay suppliers via paper check and cash, the research revealed.

For the companies that are satisfied paying invoices by check, most agreed that checks are easy to use, convenient and fast.

“This does not mean checks are easier to use, more convenient or faster than other options, however,” the report pointed out. “Our data simply suggests that AP professionals would likely want to pay via ePayables or digital wallets if given the choice.”

Indeed, with check satisfaction levels so low, it appears that the companies that have taken the ePayables leap don’t regret it.

The Other Side of the Coin

On the flip side, Same Day ACH scored the highest satisfaction rating — yet remains one of the least-used payment tools by accounts payable departments, PYMNTS research found.

Eighty-three percent of survey respondents said they are satisfied with Same Day ACH, while 76.6 percent said they are happy using standard ACH to pay vendors. Nearly 74 percent report satisfaction with paying via digital wallets.

The survey suggests that Same Day ACH satisfaction is so high because AP departments that use the tool believe their own vendors want to be paid more quickly (only 14 percent of respondents happy to use checks said they believe their suppliers want to be paid that way). More than 24 percent said Same Day ACH is their preferred payment method, with nearly 26 percent reporting that Same Day ACH is their vendor’s preference for receiving payment.

Yet just as checks hold low satisfaction levels yet high adoption, the converse is also true for ACH: Though holding the highest satisfaction levels, only 13 percent use it — a figure that drops to 7.7 percent when examining firms that process more than 20,000 invoices per month. Only virtual card ePayables, digital wallets and cryptocurrencies showed lower adoption levels.

How To Move the Needle

Considering accounts payable executive satisfaction with, as well as supplier preference for, faster digital payment tools like same-day ACH, why do organizations continue to use checks and cash?

“Old habits die hard, especially in AP,” the PYMNTS report stated. “Neither firms nor their suppliers like transacting with cash or checks, but they do so all the same.”

Organizations reflected a desire to digitize in other areas of accounts payable, with most saying they would like electronic invoicing implemented by their vendors. With businesses encouraging digitization in accounts payable points like invoice processing, that could be the catalyst to digitizing the payment of those invoices, too.

“The time to change is past due,” the PYMNTS report warns. “Neither businesses nor their suppliers are happy with the status quo, and some have already begun to capitalize on digital invoice solutions. This means AP departments are now faced with a choice: Digitize or be left in the dust.”