Every year, Ardent Partners publishes several benchmark studies into the accounts payable (“AP”) marketplace. One of those is the annual research effort into the state of business-to-business (“B2B”) payments, called “The State of B2B Payments 2015: Emerging Business Value” this year, which Ardent is proud to announce is now available. The report captures the perspectives, experience, and accomplishments of more than 200 AP and finance leaders, as well as examining the trends affecting the marketplace and offering recommendations for improvement. The full report is available for download here.
Automating supplier payments has three major benefits for the AP organization in particular and the enterprise at large. The most significant is more efficient and streamlined processing (see “AP’s Top ePayment Benefits – Efficient Processing” for more), which 52% of respondents in Ardent’s B2B Payments 2015 study named as the top benefit. Second in line, but only by a percentage point, is cost savings (51%), the subject of this article; rounding out the top three is increased accuracy and control of payment delivery (22%), which will be covered in a forthcoming article.
The Cost Savings of Electronic Payments
It could be argued that the benefits of paying suppliers electronically are mirrored in the disadvantages of paying suppliers with paper checks. Consider that the cost of processing a paper check includes materials cost in the form of check paper, ink, stamps, and envelopes, as well as staff time spent manually verifying the amount and receiving approval. At the very least, the materials cost is eliminated with ePayments, which do not need to be printed and do not need to be mailed. Moreover, the potential for over- or underpayment (a real concern with paper checks) is reduced with ePayments, as the AP team can more closely control the payment amount when using electronic methods. This reduction in error possibility can result in enormous cost savings, especially because it is comparatively easy to over- or under-pay a supplier using a paper check.
Cost savings also arise from process efficiencies. Paying suppliers electronically creates multiple efficiencies in the process because there are much fewer manual “touches” involved in ePayments, so cost is reduced because the AP team needs to do less manual work overall with electronic methods. Verification against the invoice can happen with little to no manual involvement, and payment can be approved, scheduled, and executed with few to no manual actions taken in the system (this can change depending on AP’s specific needs).
It can thus be seen that the inefficiencies of paper checks, such as manual verification and materials costs, are nearly or completely eliminated with a switch to ePayments. Electronic payments also have a quicker approval timeline, on average, which can lead to cost savings above the reduction in staff time and materials expense. Cost savings such as this are, in fact, a byproduct of more streamlined and efficient payment processing—the top benefit AP organizations receive from ePayments. (Note that a quicker approval does not necessarily mean the payment is made earlier; it merely means that the AP team can schedule the payment with more freedom because of the faster approval.)
Final Thoughts
There is a huge potential for cost savings with payment automation. Electronic payment methods in general have faster approval times compared with paper checks, and there are no materials costs with an ePayment. This results in cost savings across two dimensions, while also saving money in the context of less staff time spent on the tactical part of paying suppliers. These expenses, when removed, can result in significant amounts of money returning to the enterprise’s bottom line. Because of this, it is easy to see why cost savings are a major benefit of ePayments.
Download “The State of B2B Payments 2015: Emerging Business Value” today and find out more about how electronic payments can benefit the enterprise.
Check out these related articles for more:
B2B Payments 2015: AP’s Top ePayment Benefits — Efficient Processing
B2B Payments 2015: Why Supplier Enablement Programs Matter
B2B Payments 2015: The Top Barriers to ePayment Adoption
B2B Payments 2015: How Can Treasury Benefit from Electronic Payments?
B2B Payments 2015: How do ePayments Impact DPO?
B2B Payments 2015: The Top 3 Payment Challenges Facing Accounts Payable
B2B Payments 2015: The Importance of Payment Visibility
Ardent’s Chief Research Officer Discusses New “State of B2B Payments 2015” Report (Video)
B2B Payments 2015: The Emerging Business Value of Electronic Payments
Ardent’s “The State of B2B Payments 2015: Emerging Business Value” is Now Available
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