Why Paper Checks Remain the Dominant Method of Payment in the B2B Realm

Apr 20, 2017 by Kenzie Earle

Despite widespread availability and development of digital payment methods, paper checks are still alive and well in the world of Enterprise. The phrase "paperless society" is thrown around without much weight and may have many believing that swipes of plastic, insertion of chip readers and cash transfers at the click of a mouse are the predominate means of paying bills. Where this presumption may be more relevant on a B2C basis, the reality is that in 2016, 97% of companies that participated in a research study are still using paper checks to pay vendors and receive payment from customers. Looking at this from a sheer numbers standpoint, this means that there is $550 Billion stuck in pre-Internet paper, plastic, & manual processes. The Financial Revolution is here, so what is making the paper check so seasonable?

Fee Aversion and ROI: More than half of American companies keep cost low by avoiding payment of credit card processing fees. It’s a common perception that for the sake of your ROI, it pays to use paper, whether they are paying vendors or receiving payment from customers. Total revenue from non-employees hit $989.6 billion in 2011 and has continued to rise from there. In the B2B and enterprise domain, there are large-scale operations that are opting out of digital forms of payment and still leaning on the comfortable and familiar crutch of the paper check. As revenue, transaction volume and size continue to grow, the cost of paper check will begin to infiltrate the ROI that was being guarded with the wrong infantry. Unfortunately, it is not common knowledge that the cost of issuing or processing a paper check is roughly $10 while the digital equivalent is around a tenth of the cost. What does this mean for you? It’s time to quantify your spend and rid yourself of overt costs. 

Old School Mentality: Surprisingly enoughritual plays a role in how business is conducted; studies have drawn a link to cause and effect being associated with business tactics. Many business owners relish in the custom of getting out the checkbook, scratching out the numbers with a favorite ink pen and scribbling their signature at the bottom. It creates a feeling of having "arrived" at your ambition's destination. So although a digital payment may offer a popular convenience factor that a manual process does not, it just won't do if it’s the ceremony you crave. The synopsis? It is less about the ‘old dog’ being teachable, and more about the dog finding fulfillment in the traditional tricks. 

Times Are Changing – So Should Your Strategy: Before SaaS swept the nation, a larger number of Vendors offered a discount for payment via cash or check. By opting out of credit card transactions, a vendor could potentially save up to 5% in processing fees. They reward their customers by passing the savings along. Now that subscription based services have made their impact on the world of B2B, digital payment has also made a long-tail impact on savings and cost reduction – ACH and eCheck are two digital payment solutions that can be processed for a very low, flat rate and they eliminate the manual processing that a paper check entails; by improving your time-to-cash, you are speeding business along and making way for your next business endeavor. When it comes to high-dollar transactions, a paper check is seen as a safe route – where in reality, until it gets manually routed to your bank to be verified and processed, quite literally floating its way to your door while you rely on a gentleman’s agreement to ensure you won’t have to absorb the fees associated with a bounced check. If you are in the world of enterprise, you are familiar with the elite and dynamic mindset it requires to stay relevant in corporate America. In short, the use of the paper check is an antiquated process for industrious companies that want to remain dominant and relevant. A digital billing suite will not only improve your DSOs and time-to-cash, it will increase customer retention with dunning and scheduled payments, and reduce transactional costs.

Record Keeping: Documenting transactions is critical to the success of any business. The paper trail created by check payments is tangible and information-rich. There is physical evidence of what took place every step of the way. A company knows when their check was received and processed. A payee's financial institution records a digital image of the check when it pays out. Having such a record makes solving any dispute a piece of cake. To provide proof of payment a business simply accesses the document image of the processed check. Having a paper trail makes it easy to provide proof of payment. A chief concern in using digital payments is the potential loss of remittance information. What solutions can provide the value of digital payment and the remittance information available in paper checks? To hold the assumption that digital payment lacks an accessible paper trail is a common misnomer. Modern payment processors can integrate with your accounting software and make the accounting flow both seamless and paperless – though the same intricate information that can be found with paper check is readily available. Technology is proving to be powerful ally; the audit trail is impenetrable in blockchain technology thanks to core feature of the blockchain called immutability; when an electric record is recorded, it can never be altered or deleted.  

Fund Verification: Managing business expenses with check payment usually involves balancing a checkbook for transparency and security purposes. On the accounts payable side, there is security in knowing that funds are available when a check is issued. It's a different ball game on the AR side, where you have far less control over payment remittance.  A bounced check can be a major pain point for the person responsible for processing your accounts receivable. Though it may not be a problem that is given much recognition, it's a relevant issue that can heavily disrupt the fluidity of business; a bounced check comes with a fee as well as additional manual processing and it upsets cash flow. Modern cloud payment software gives you access to a custom dashboard which gives you transparency into a real-time ledger with a transaction history and breakdown. Only PayStand gives you everything you need to accept eChecks alongside credit cards, in a single checkout with instant funds verification.

Your business may be one of the millions of American businesses still leaving a paper trail. If you have long practiced a policy of not accepting electronic payments, maybe it's time to reconsider. New innovations have resulted in lower fees and receiving payments faster where digital payments are concerned. It can also open up your business to a market you have been missing out on, those companies and customers who only engage in digital payment. Now, it's easy and affordable to do both! Please contact us and we can speak on your pain points as a company, custom solutions and open up the flood gates to a digital world with payment options and features you may have had no idea was accessible at your fingertips.