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Can My Company Benefit from Electronic Payments?

Electronic payment processing can dramatically increase the productivity and decrease the overall cost of your payment processing. Virtually any business can benefit from adding an electronic EFT/ACH payment system.
Businesses now realize cost-savings from the emergence of electronic payment processing systems. Backed by the Federal Reserve and governed by NACHA (National Automated Clearing House Association), electronic payment processing has provided a definite source of cost savings for businesses. If you pay recurring vendors and employee expenses, you can benefit from this “new” technology.

In 2003, 10.4 billion payments were processed by the ACH network. This represents $27.4 TRILLION (Source: NACHA) and a considerable movement towards an all-electronic payment system. The growth in acceptance of electronic payments has obviously jumped in the last 2 years. Corporate users who have added ACH payments to their payment stream have realized the inherent cost-savings electronic processing offer. You can profit by adding them to your payment stream.

Regardless of the size of your company, there are bound to be inefficiencies in your payment chain.  Electronic payments can make you more profitable.

The Electronic Payment Process
Payments traditionally contain two parts, the actual payment (cheque) and remittance details (advice).  To converting your payment batches to EFT/ACH means formatting the payment information to bank formats for submissions and disbursing of funds.  Extracting remittance details and creating an electronic remittance advice for automated presentment (email, web or fax) is of equal importance, as payees require this information to process payments.

“My current payment system seems efficient. Why would I put my company through the trouble to change it?”

Electronic payment processing is a more efficient, and therefore more profitable, method of processing payments than the “traditional” methods. The most common misperceptions regarding payment processing are that 1) manually processing payments is efficient, 2) doesn’t cost very much. If these common beliefs are true, why are so many companies moving to electronic ACH payment systems?

Electronic Payment Processing: “Is It Right For Our Organization?”

To really answer this question, several points need to be addressed.

  1. • What is your current cost of payment processing?
  2. • How much productivity can you gain from an electronic system?
  3. • Are there any areas of your system which could benefit from streamlining?

Independent research with companies that have studied the costs associated with their payables has revealed that costs range from $15 to $25, and even up to $50 or more to issue each cheque.   Three different areas comprise the cost of processing paper payments: direct, time and labour and opportunity.

“Where will I save time and money?”

Direct Costs

This is the most obvious cost, and the simples to review.  The paper payments have a much larger cost of creation vs. electronic.  These include cheque stock, envelopes, significantly higher bank transaction charges, postage/courier, printing, sorting, etc.  Replacing cheques with electronic funds transfers (EFT/ACH) will reduce or eliminate most of these direct costs.

Time and Labour

The largest costs are clerical and handling.  Simply having AP staff printing, sorting, stuffing/folding, stamping and delivering, is time consuming, especially since their time can be much better utilize.  If you take the time to examine how much time it takes to perform the tasks and the cost of labour involved, you quickly equal what the independent studies have already concluded.

Opportunity Costs

From penalties for pate payment, to missed discounts and additional discounts many vendors give to receive payments electronically, opportunity costs can be substantial.
Our payment automation solution will help you seamlessly transition from paper to electronic.  As more vendors sign up to receive payments electronically, less paper cheques will be processed.   You will not be adding layers of processes to your AP staff and software tools to generate payments, you will only have ONE.
In summary, the cost of your payments must include not only the actual cost per transaction (transaction fee or discount rate), but also the real numbers you spend for labor and the time you wait to receive the funds. While many of these can be considered “cost-of-businesses expenses (labor costs, settlement times and bank fees), if there was a way to reduce or eliminate these expenses (and thereby increase profits), would you make the change?

“How much productivity can we gain?”

You will see efficiency gains at any point.  Whether you are moving only 20% or 90% of your volume to electronic payment and presentment.  You remove the physical check from your payment process the need for employees to handle the multiple processes is eliminated. This approach increases productivity right away. 

The process of reconciliation is now simplified and transfer of funds is predictable and cash flow management is drastically improved.

Compare the electronic process, where the process becomes point and click, to the manual process, which entails 6 to 7 separate steps in which the checks are handled and the information can be entered many times. The productivity gain is substantial.

“What about the payment security and control?”

AFP survey reviled that in 2005, 68% of corporations in North America were affected by payment fraud, 94% made up by cheque fraud and less then 1% electronic payment (credit).  With that, 28% of affected companies actually suffered a financial loss, average of $26,600. 

“Is my organization large enough to justify the capital expense?”
Facta Vera delivers multiple options for corporate payment processing, from simple EFT/ACH conversion to full enterprise payment management, processing and presentment to suite your needs, volume of processing and justified Return on Investment. 

Over the past five years, acceptance of electronic payments has drastically increased “IDC, in a recent report (March 2002), forecasts a compound annual growth rate of 117 percent for electronic payments over the next five years” making it simple for corporations to utilize EFT/ACH forms of payment and decreased in cost.

A move to Electronic Check Processing WILL save you money.
     
     
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