“For years we’ve been hearing that checks are going away, yet they are still used for the majority of B2B payments in North America.” I have heard that statement at nearly every trade show that I have attended this year. The trend toward electronic
payments has been strong in the retail banking world where the ever growing availability of online banking and continued growth of debit card usage has resulted in declining check volumes.
But on the commercial side, analysts estimate that 10.6 billion B2B US check payments were made in 2009 and 1.99 billion B2B ACH transactions were made in 2009. That’s 84% checks, 16% electronic. Why do companies continue to pay by check? In this multi-part
blog series I will explore the reasons for the continued use of checks for B2B Payments. In this post, I begin with reason number one.
Reason #1 - Checks are Easy. We’ve built up business processes around checks and when you walk through what actually happens when you issue payments you see that this really is a well oiled machine and it is part of the reason why it has been difficult
to migrate away from checks. We have ERP systems in our organizations setup with checks as the default payment method. That’s the way they were designed and it is the easiest way for most to make their payments. We’ve also got a banking system that for
decades has been making it easier and easier for businesses to process check payments. Efficiencies in lockbox processing and the advent of electronic check clearing have nearly made check processing fully electronic. So we’re benefiting now from these mature
processes that have been established. The irony is that the payment data begins life in an electronic format, is converted to paper for transport and then is reconstituted in an electronic format upon receipt.
And the key reason why paper is used for transport? Because to make a payment via check, you only need your supplier’s address (which is included on the invoice). Electronic forms of payment require that you know your vendor’s banking information. Gathering
this information is time consuming and never-ending; this banking information changes and requires significant effort and cost to maintain. While checks are expensive and labor intensive, some will argue that they are easier.
Which is easier for your organization? Issuing checks or maintaining electronic banking information? In switching your organization to electronic payments, are you being met with the argument that paper checks are just easier?