When the carousel stops and it’s time for vendors to pay up, old habits die hard. Some vendors prefer writing checks over electronic payments through ACH, simply because that’s how they’ve always done things.
Never mind that electronic fund transfers occurring between banks are fast and leave a rock-solid record of transactions. For these vendors, any change looks like a steep mountain to climb.
Others are leery of sending money electronically. Or they imagine that the ACH set-up process will be a pain.
Whatever the reason, checks continue to play a central role in business today. Believe it or not, a 2022 survey by the Association for Financial Professionals (AFP) found that when it comes to outgoing payments, 86% of organizations are still using paper checks even as e-invoicing mandates and sustainability requirements soar.
But is change in the air? AFP also found that check volumes decreased by half in the past seven years, and 73% of organizations are transitioning their B2B (business-to-business) payments from checks to digital.
Even though convincing reluctant vendors isn’t easy, using ACH is one of the most powerful ways to cut costs and boost your bottom line.
“Think about it this way,” says Nathan Baker, Director of Product Marketing at Billtrust. “With ACH, you’re removing two steps from the process: cutting the check and the time it takes to physically drop a check in the mail until it shows up at its destination.”
ACH payments: A no-brainer for AR
Most accounts receivable (AR) departments quickly grasp the advantages of ACH. First and foremost are cost savings. AFP has found that it costs $1 to $2 to receive a single check, while it costs far less–50 cents per transaction–to receive an ACH payment.
That’s just the beginning. Billtrust has shown that the typical ACH transfer halves the days outstanding for a payment when compared with receiving a check. In the current environment of 6% and 7% inflation, getting money faster makes a huge difference to your bottom line.
Second, ACH payments enter a company’s bank account with a maximum of electronic information and a minimum of fuss.
Armed with those powerful benefits in mind, AR heads are increasingly willing to ask vendors to overcome habit and inertia and try ACH.
Making the case for ACH payments
Convince your reluctant vendors to get on board by telling them the facts.
1. No more cutting checks
Cutting checks is expensive. Not only are there price tags associated with materials and postage; you have to consider the cost of labor, too. For vendors that cut hundreds of checks a month, switching to ACH could reduce employee overhead, sometimes dramatically.
Here’s how the argument plays out in dollars and cents. The median cost to issue a single check is $2 to $4, compared with just 26-50 cents to initiate an ACH transaction, according to the AFP.
2. Never having to say you’re sorry
Is there any more cringeworthy sentence than “the check got lost in the mail”?
Even though that excuse is certain to earn you a roll of the eyes, checks do get lost—and it’s happening more frequently than ever. In the 12 months from March 2020 to February 2021, the U.S. Postal Service received 299,020 complaints of mail theft, an increase of 161% over the same period the previous year.
Even when a check does arrive safely, remittances are sometimes decoupled, a fancy way of saying that the check gets separated from the payment information and so someone has to research where the payment came from.
Vendors that pay via ACH know exactly where their money has gone. What’s more, when questions arise, they can prove they’ve sent the payment through the electronic equivalent of a paper trail.
3. No more living in the dark ages
ACH payments have steadily grown in popularity over the past 10 years. In 2022, there were 30 billion ACH payments, with a total dollar value of $72.6 trillion, compared with 17.55 billion ACH payments worth $38.7 trillion in 2013.
Vendors that can digitize accounts payable can integrate transactions directly into their enterprise resource planning (ERP) systems, usually without a single employee lifting a finger.
The result? ACH makes strategic decision-making and planning far simpler.
We think these benefits of ACH payments for vendors are pretty watertight. Now it’s up to you to use them in your next vendor conversation.
