Making Your Case: The Four E's of Payment Automation

Paying suppliers by check is a practice that has endured for much longer than anyone would have imagined. For a while, it looked like COVID-19 might be the tipping point for companies to go completely electronic. After an initial push in that direction, however, many accounts payable departments still send their workers into the office to process invoices and manage the manual check process.

It's not enough to want to get rid of paper checks. The case against them is not strong enough on its own. It has to be combined with a strong business case in favor of something else.

Even though manual processes are expensive, there are some rational arguments for relying on check payments. You don't have to enable suppliers for electronic payments, manage banking data, or worry about ACH fraud. You can even outsource the process. While suppliers generally like the idea of electronic payments, they can also be deterred by complex enrollment processes.

People may also still be attached to the idea of check float. Even though interest rates remain at historic lows, it can provide a sense of security to see money in bank accounts for longer. Some businesses even have tenured employees who are used to older processes. 

Is the check-writing process really that bad?

The answer might have been different in January 2020, with easy access to check printers. But now that accounts payable teams are frequently working remotely, their processes often involve driving into the office and to other residencies to get checks signed. Add in the other check-stuffing and mailing steps, and you've got a significantly time-consuming task.

Despite the laborious nature of this process, many organizations have still stuck with it. At any rate, the widely-predicted wave of late payments never formed. People dug in and got things done, despite the unforeseen challenges. The added steps have now become business as usual.

The 4 E's

While it seems absurd to add "driving paper around" to anyone's job description, it speaks to how deeply checks are embedded in the B2B world. Companies hadn't drawn the line at walking checks around for signatures, keeping a safe full of check stock, or renting an offsite storage space for paper files. What's one more step?

There are plenty of reasons why it makes sense to stop writing checks, but we've narrowed it down to four. These "Four Es of Going Electronic" make up a compelling business case for payment automation adoption. 

Economics. What does it cost your organization to write checks? And not just the sum of material costs like ink, check stock, envelops and stamps--which generally comes out to about 75 cents per check. But also consider the cost of time and people. Industry analysts estimate it's more like $3 to $5 per check, and it could be as high as $10 in some organizations. Remember to consider opportunity costs in your economic analysis. For example: What could your AP team spend time on instead, once extensive check processes are streamlined? 

Efficiency. Even if you only write checks, you might have workflows established for different variations of payments. Perhaps they're based on the payment amounts, signatures required, or even supporting documentation. All these manual and mechanical workflows could easily be automated, so approvers and signers can do their role in minutes, from any location.

Experience. How do suppliers want to get paid? Do they want to go to the office to handle checks? With ACH or card, suppliers get their money faster, without the threat of a check bounce looming over their heads. If you apply some technology to remittances, cash application experience can be much quicker and painless. 

Ease of implementation. It's easy to do things electronically, but your business case breaks down if you don't have the resources to contribute towards the implementation process. Suppose you're going to look for an automated payment solution. In that case, an important aspect to focus on is the ease of deployment. How much work goes into automating things by yourself or with a specialized provider?

Going it Alone?

If you automate the process yourself, you'll need to figure a few things out. For example, to create more automation, you'll need to find a printing organization to cut your checks--IT will need to create a file to their specifications. You'll be required to keep them supplied with check stock. Then your IT team will need to create another file for your bank for ACH payments. You'd have to run an enablement campaign to get suppliers on board, come up with a process for storing and maintaining their information.

Doing all that on your own is a significant undertaking, and when you get right down to it, this is a big part of the reason that checks persist. The case against checks isn't strong enough on its own. The case against automation counterbalances it—at least automation as we've known it in the past, which is much as I've described--a process that leaves you juggling multiple workflows at once. Even then, you're still probably making half your payments by check. People who have experience using both paper and pseudo-electronic methods generally prefer the former.

Compare that to just handing it off to somebody who can automate the whole process and implement it in about six weeks, needing only one to four IT hours. That is what is possible with today's payment automation solutions. You also get continuous vendor enablement, fraud protection, error resolution, and a payment guarantee in the bargain.

What often happens is that employees who want to get rid of checks are the ones most burdened by them. With working from home becoming the new norm, these people are more burdened than ever before. Yet they are not typically the decision-makers when it comes to choosing which projects receive funding. The most significant competition for automation is simply the simplicity of maintaining the status quo.

Perspective is everything. It's rarely enough to point out how to disrupt the norm--you have to paint a picture for a better future. When writing a business case for payment automation, draw attention to the permanently simplified (and cheaper) workload that automated processes would bring, rather than focusing on the temporary unfamiliarity of your solution. Keeping that kind of mindset may accomplish what years of manual effort have not: eliminating business check writing once and for all.