The electronic payments sector is growing day by day. Just as other technologies, these forms of payment including ACH, wire transfers and virtual cards, have too many advantages to ignore. At the same time, paper payments through cash or check are disappearing. There are a number of reasons for this change.
Organization and File Keeping
From a business perspective, one of the most important reasons to implement electronic payments is due to their automated file keeping nature. Every payment is kept on a list as soon as it is completed. Auditors, managers, accountants, financial professionals and others can simply check every payment to understand how the cash flow position has changed over time.
This system can then be integrated into financial and tax programs that create a more comprehensive picture of the company’s finances. These programs break down where spending is going and even suggest ways to reallocate funds more efficiently.
Secondly, the software programs help companies determine where their investments are paying off and where they still have more work to do. That is because they identify costs very clearly. Investments that were meant to reduce those costs can be tabulated very easily.
Lastly, data can be shared among the office and with other teams with the push of a button. In the old world of paper transactions, sharing information was cumbersome and required personnel to be in the same location. Today, the entire payment system can be on a single dashboard. Teams can each view the segment they are most interested in, without even necessarily consulting with the accounts payable team (provided they have the appropriate permissions).
Of course, electronic payments are much quicker to process than a check. Whereas a check takes 3 to 5 days to process, a ACH or wire transfer will drop on the same day as the transaction. The back-end banking system is set up just for this purpose.
Additionally, an automated system means that the supplier gets paid early or on time. Although in the world of paper payments a payment team may forget or delay payments, this is much more difficult when the payment is pre-scheduled. Unless the buyer is under real financial strain and actively alters their electronic payment schedule, most payments will be delivered as planned. This makes sellers much more comfortable in their partner and may even result in offering slight discounts or better transaction terms.
Convenience for Accounts Payable and Accounts Receivable
Payments like ACH, wire transfers and virtual cards all make life much easier for the accounts payable and accounts receivable team. Automated payments mean that the data is already stored and filed on a convenient payment list either through the bank or through internal systems. Either way, both the supplier and purchaser payment teams have a much higher degree of confidence and less work to do. That enables more business to be done and more efficiency with less workers.
Cutting Edge – Mobile Payments
The most novel form of electronic payments are via mobile apps and bar codes. These payments are growing the most rapidly although still at a small total volume. Apple Pay, Samsung Pay and other hardware providers have already instituted these mechanisms.
Once those payments are linked to a business account, purchases can be made, saved and itemized efficiently without the need for a corporate checkbook, credit card or expense report.
On the other hand, the items available for purchase via mobile payment is still very small. Companies may acquire office supplies at retail stores for example, through mobile payment. Large orders for machines, services or other costs of goods usually rely on traditional online or offline payment methods.