According to a report by the Aberdeen Group, 10 billion B2B transactions are processed in the United States annually. As the B2B industry is rapidly growing, this number is expected to rise significantly. However, over 60% of businesses still process these transactions by hand. Shifting your payment process from a paper-based manual process to an automated electronic payment method can drastically reduce the costs associated with making payment, as well as significantly improve processing time.
Going paperless and streamlining your payment process works to improve back office processes. In turn, this can also improve cash flow, as money flows in and out of accounts more efficiently, with reduced risks for manual errors.
Here we take a look at the differences between paper and electronic payment methods. While it may seem overly simplistic to list out the steps, it’s important to identify which processes are wasting valuable paid time and costly resources. Then, we’ll show how automating this process can considerably improve your back office operations.
The Paper Method
Receiving the Bill
1) Pick Up and Open Mail
A staff member has to wait for the mail to be delivered, sort through and separate the mail and then open the bill. This method subjects bills to environmental factors such as delays in mail processing, substitute carriers, and weather events that impact the speed with which the bills are delivered.
2) Process and Post Bills
After opening the mail, the bills need to be manually processed. Once reviewed, the bills are then posted to the appropriate account.
3) Send Report to Approver
Once posted, the bill has to get sent to the approver. The physical bill then has to be manually transported from one department to another, in order for the approver to review the bill.
4) Review with Approver and Coordinate with Vendor
An approver reviews the bill and makes arrangements with the vendor to make payment.
Paying the Bill
5) Cut Checks
After a bill is approved, a staff member then has to cut a check complete with signature for the amount on the invoice.
6) Stuff and Mail Checks
Once the check is cut, it then has to be folded and stuffed into an envelope, addressed, receive postage, and then placed for postal pick-up.
7) Coordinate with Vendor
The vendor awaits for the arrival of their check, opens the envelope, signs the check, and submits the check to the bank to make the deposit.
8) Reconcile Bank Accounts
After the check is cashed (a processes that can take up to a few days), both companies need to reconcile the transaction with their accounts. The vendor needs to check to make sure the payment matches the invoice while the payee needs to make sure that the amount in the books was the amount drawn out of the bank account.
The Electronic Method
Utilizing an electronic payment system, you can reduce the amount of steps per transaction down to four. These steps are:
1) Bills Are Delivered Electronically
Bills and invoices are emailed directly to the inbox of the person (or persons) in charge of Accounts Payable.
2) The Bill is Coded and Routed for Approval
Once the bill is received, staff can code the bill for the corresponding account and then send it off to the staff person in charge of payment approval.
3) Payment is Approved
Without having to wait for a paper memo to be printed and delivered by hand, the digital bill, complete with coding, is sent as soon as it is coded to the appropriate person for approval. Once reviewed, the bill can be either approved or sent back to correct for errors.
4) Payment is Made Electronically
Once the bill is approved, funds are withdrawn from the appropriate account and sent digitally to the payee. This eliminates the need for cutting a check, mailing, and then waiting for the payee to open the check, sign the check, and then deposit the check while factoring in time for bank processing.
In fact, GrowthForce no longer mail checks out of our office – all of our clients are using our online bill payment system. Each week, our clients log in from any computer, even from their iPad, to review their bills to be paid. If they have questions, they click on the bill and are able to open and view the related documents before paying. And since GrowthForce uses Bill.com, it automatically updates their QuickBooks file and their online bank account with each sync. Automating your payment processes now will add up to less paper, less storage, less fraud risk and equal more time and resources for your business.