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Why Do Checks Still Dominate B2B Payments in NA? Cont'd

Why do companies continue to pay by check? In part five of the series, “The Top 5 Reasons Why Checks Still Dominate B2B Payments,” I explore the challenges of corporate inertia and resistance to change.

Reason #5 - Corporate Inertia and Resistance to Change.  Let’s face it, organizational change is difficult.  For some, the risk of change exceeds the risk of maintaining the status quo. Employees can become complacent as processes mold into routines (“we’ve always done it this way…”).  Change forces employees out of their comfort zone.  It is this uncertainty and fear that lead many to continue operating in the ways that they have become accustomed to.

Another significant reason for resistance to change is lack of understanding of the vision of a particular project.  “What’s in it for me?” questions arise as employees wonder about the stability of their jobs, if/how their work will be impacted, and if they will benefit from the change.

An organization’s track record with past projects can impact internal support.  Past failures can lead to skepticism as projects are viewed as change du jour.  Employees may expect them to be short-lived.   

Some will guard their prerogatives and their perquisites.  For others, the predominant characteristic of their organization is risk aversion.  And some employees may be supportive, but genuinely believe that they cannot possibly handle the new demands that will be placed on them during the project.

In the medical world we are familiar with the phrase “minimally invasive surgery.”  Along those same lines, it is possible to bring about change in an A/P department in a minimal way, and in a way that brings benefits without complications and inertia.  Outsourcing of payment execution, a non-core business function, is a project that can be implemented successfully without requiring dramatic change and without fostering the types of resistance that I describe above.

What about your company? Have you made attempts to eliminate non-core business processes?  How successful have you been?   

 

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A Finextra member
A Finextra member 04 April, 2011, 17:29Be the first to give this comment the thumbs up 0 likes

This is a great series of articles "Why cheques still dominate B2B" sorry about my English spelling of the word.  

I fair the real king hitter is on your Remittance article and I quote from you here "Remittance is critical for suppliers because the absence of remittance details can lead to delays in applying the payment to the proper account"

I see some useful business advantages to the cheque instrument and I'll list some of them below in brief:

1) It takes longer to clear a cheque and that is generally to the advantage of the writer.

2) Cheques can be post-dated as a promise to pay even though this is not a legal practice in many countries, it is employed by a lot of businesses.

3) Cheques can be held as guarantees and in this respect they are an instrument of bill. In this unique case they are used as deposits without interest aren't cleared and held as collateral on a promise but then destroyed or cancelled.

4) Cheques are transferable before clearing as a draft – such as a cheque made to cash.

5) A Cheque can be executed anywhere at anytime and you don't have to be connected to the network.

6) It is gesture of good will and business protocol to exchange one piece of paper (the receipt) for another (the cheque).

7) They can be used as a bearer share holding value or crossed not negotiable and thus are only valuable to an assigned party.  You can steal cash but not a cheque in the till.

8) They can be passed to subordinates to settle a third party debt but without risk of loss.

That's my list but I found all of your top five articles intriguing and quite true.  

The crux of the issue with electronic funds is that many of the business practices of pay and hold, deposit and guarantee, transfer of trust are simply not supported in the electronic medium --- yet.

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This post is from a series of posts in the group:

Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.


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