Mariana Lamson
By Mariana Lamson, Chief Financial Officer, Boost Payment Solutions
In today’s fast-paced business environment, operational efficiency is no longer optional—it’s essential for maintaining a competitive edge. Companies are continually seeking ways to streamline operations, reduce costs, and improve client relationships. One area where many organizations are still clinging to outdated practices is accounts receivable (AR), particularly the reliance on paper checks for payments. According to the 2022 AFP Digital Payments Survey, 86% of global companies still pay some invoices with checks and 92% accept checks as payment. But companies are exploring other payment options and virtual cards have rapidly emerged as the fastest growing form of commercial card payments, driven by their convenience and enhanced security features. The Fredonia Group estimates that through 2027, US commercial cards will grow at a CAGR within the range of 16.6% to 21.0% while globally, commercial cards will grow to $81.6 trillion by 2027 with a CAGR of 5.0%.
Standard Method Challenges: A Drain on Resources
For decades, businesses have used paper checks as a standard payment method. However, this traditional approach presents several challenges. The manual processing of paper checks is time-consuming, requiring manual entry, reconciliation, and, often, follow-ups on delinquent payments. Delays in mail delivery can further extend the payment cycle, negatively impacting cash flow. In addition, the lack of visibility, which increases the risk of checks being lost or stolen, adds a layer of vulnerability that can threaten financial security. The 2023 AFP® Payments Fraud and Control Survey Report found that 63% percent of respondents reported that their organizations faced fraudulent activity via checks. Solutions like virtual cards generate unique card numbers for each transaction, minimizing the risk of fraud and streamlining payment processes.
Additionally, the operational inefficiencies tied to paper checks divert valuable resources away from strategic initiatives. Employees spend excessive time managing incoming payments, reconciling accounts, and resolving discrepancies, leading to increased human error and inaccuracies that complicate financial reporting and forecasting. Collectively, these manual processes also prolong the payment cycle, resulting in increased Days Sales Outstanding (DSO) and impacting cash flow. It’s no wonder that on average, manual processing of payments is 67% more time-consuming compared to automated payment solutions.
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Making a Case for Automation: A Strategic Investment
As organizations seek to overcome the inherent challenges of paper checks, automating AR processes emerges as a strategic solution. For example, virtual cards uniquely support automation by streamlining processes, reducing manual tasks, and providing greater control and security. By integrating digital payment methods, like virtual cards, businesses can also streamline their invoicing and collections processes, significantly reducing the time and effort involved. Automated solutions allow for electronic invoices to be sent directly to clients, with the option for them to pay via credit card, ACH, or other digital payment methods. This eliminates the need for manual data entry and reduces the risk of errors.
Moreover, automation facilitates faster payment processing. With digital payment options such as virtual cards, funds can be transferred as early as the same day in certain circumstances, improving cash flow and allowing businesses to reinvest in growth opportunities more quickly. This quick turnaround also improves working capital, enabling companies to meet their financial obligations without delay.
Improving Client Relationships: To Drive Financial Growth and Engagement
Transitioning to automated AR solutions does not merely streamline internal processes; it also enhances the client experience. Clients today expect convenience and speed, and digital payment options align perfectly with these expectations. By offering multiple payment methods, businesses can cater to the preferences of their clients, fostering satisfaction and loyalty.
Additionally, automated reminders and notifications can be integrated into the system, keeping clients informed about upcoming payments or overdue invoices without the need for manual follow-ups. This proactive communication demonstrates professionalism and can strengthen client relationships, as clients appreciate the ease, clarity and options in the payment process.
Cost Savings and Resource Benefits: Financial Stewardship
Beyond improving cash flow and client relationships, the shift to automated solutions can yield significant cost savings. The expenses associated with printing, mailing, and processing paper checks can add up quickly. For example, the costs associated with processing paper checks are significantly higher compared to digital payment methods. It is estimated that the manual processing costs for US payments are in the range of $12-$30 per invoice, whereas on an annual basis, paper invoice processing can cost over $170K. By adopting digital payment solutions, businesses can eliminate these costs, redirecting resources toward more strategic initiatives.
Automation also allows organizations to reallocate staff who previously managed AR processes. With fewer manual tasks to handle, teams can focus on higher-value activities, such as strategic business initiatives.
Integration and Customization: Tailored Financial Solutions
Modern automated AR solutions are designed to integrate seamlessly with existing accounting and enterprise resource planning (ERP) systems. This ensures that businesses can maintain a cohesive financial ecosystem while enjoying the benefits of automation. Many solutions also offer customization options, allowing companies to tailor workflows, reporting, and client communications to meet specific business needs.
Transitioning from paper checks to automated AR solutions is not merely a trend; it is a strategic move that can yield substantial benefits for businesses of all sizes. By streamlining processes, improving cash flow, and enhancing client relationships, companies can position themselves for sustainable success in an increasingly competitive landscape.
As organizations continue to adapt to the digital age, embracing automation in accounts receivable such as utilizing virtual cards will be crucial. The elimination of paper checks is not just about reducing costs; it’s about creating a more agile, responsive, and customer-centric approach to financial management. Businesses that take this step will not only improve their operational efficiency but also set the foundation for sustainable growth and stronger client partnerships in the future.
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