Businesses of all sizes are increasing their use electronic forms of payment to help improve their cash flow, the results of a recent Aberdeen Group study show.
“Companies are taking more proactive approaches to integrating electronic payments with their financial systems,” Nasreen Quibria, the Aberdeen senior analyst who conducted the research, tells PaymentsSource. “Companies are focused on cash flow and how they can optimize the cash they have.”
For its study, Boston-based Aberdeen in May surveyed more than 160 companies operating throughout the world. Sage Payment Solutions, a McLean, Va.-based payment processor, and Syncada, a Visa Inc.-owned business-to-business payment company, sponsored the research.
Not surprising, companies’ use of checks is generally on the decline as more businesses pursue electronic alternatives, the survey found. Though 11% of respondents said they increased their use of paper checks during the previous 12 months, 57% said they decreased their check use and 59% increased their use of automated clearinghouse services.
Larger companies–with more than $1 billion in revenue–were more likely to use ACH services to pay their suppliers than were smaller organizations, Aberdeen’s research found. One impediment for smaller businesses is that ACH services that integrate into a company’s accounting system often are costly, Aberdeen notes in its research report.
Commercial cards also gained favor among respondents. Forty-five percent expanded their use of such cards during the previous 12 months, and 43% increased their use of wire transfers to make or receive payments.
Corporate mandates to reduce overall payment-transaction costs are a primary driver for the increasing use of electronic payment methods, Quibria says.
The study found that 69% of large companies, 66% of midsize companies and 68% of small organizations cited such mandates as a primary force in their move to electronic payments.
Small and large businesses differed, however, on the role risk of payment fraud played in their adoption of electronic payments. Though 35% of small-business respondents cited risk as a factor, only 13% of large businesses did.
The various payment methods also have costs, with the electronic methods often being cheaper, the survey found. On average, the average cost per transaction for handling a paper check was $7.15, compared with $4.72 for an ACH transaction and $3.96 per commercial card transaction. Wire transfers, at $9.86 each, were the most expensive, primarily because completing one requires manual input of remittance information, such as invoice and customer numbers.
Taken together, the study’s findings point to companies of all sizes adopting a holistic view of their payment methods, Quibria says.
In the past, each payment method was viewed individually because that is how banks handled them, Quibria says. “But companies need to handle all different types of payments,” she says. “When it comes to their [service] providers, they want to be able to handle different payment types through one vehicle.”
What do you think about this? Send us your feedback. Click Here.