Few people want to cut checks, lick stamps or sign invoices.
Every single business day, however, these same outdated activities are done countless times by many of the world’s finance and accounting professionals.
Despite the rise of digital transformation in finance and business operations, companies ranging from small- to medium-sized businesses (SMBs) with limited resources up to Fortune 500 enterprises still rely on legacy systems and paper-based processes.
The PYMNTS Intelligence report “Getting Paid: Digital Payments for Improving Cash Flow and Customer Experience” found that 75% of companies still use paper checks.
And it could be costing them more than they realize.
Read also: Unlocking the 3 Biggest Benefits of Automating Accounts Payable
While continuing to embrace and rely on traditional methods like paper checks and manual accounts payable (AP) and accounts receivable (AR) may appear cost-effective on the surface when compared to investing in digital innovation, the hidden costs can be substantial, affecting not only financial performance but also operational efficiency, security and scalability.
“Businesses are worried about the investment in terms of time and resources,” American Express Vice President of Marketing, Business Blueprint and Small Business Banking Brett Sussman told PYMNTS in August.
However, paper-based processes, particularly those involving checks, incur direct costs that include printing, mailing and processing. These costs, when accounting for labor, postage and handling, can compound quickly — particularly for businesses that process hundreds or thousands of payments monthly. The PYMNTS Intelligence report “Automating Accounts Payable for Cost Savings” found that 34% of businesses process more than 5,000 invoices per month.
In today’s fast-paced environment, checks have slower processing times compared to digital payment methods, leading to delays in clearing funds. This inefficiency can cause cash flow issues for businesses, forcing them to rely on costly lines of credit to bridge liquidity gaps.
The PYMNTS Intelligence report “Businesses at Risk: The High Cost of Manual AR Processes and What to Do About It” revealed that 59% of U.S. businesses link poor cash flow and forecasting to outdated manual AR methods.
“One change can affect three or four different parts of your business,” Priority Head of Commercial Court Toomey told PYMNTS in an interview posted Sept. 5. “There’s no need for a large manufacturer to have to send out 10,000 rebate checks to every individual retailer that’s selling the product on a quarterly basis when there is a much more efficient way to do so, as long as they work with it within their supplier network or their buyer network in order to implement that change.”
See also: 4 Questions for CFOs About AP and AR Automation
Paper-based methods require extensive manual handling. Employees must write, print, sign and mail checks, and recipients must manually deposit them. This creates a labor burden, particularly in AP and AR departments. The manual reconciliation of these payments also takes time, increasing the likelihood of errors that require additional labor to correct.
Paper-based processes and check payments also make it difficult to access real-time financial data, as the manual steps involved cause delays in recording transactions. Without real-time visibility into financial operations, businesses struggle to make informed decisions, optimize cash flow or detect potential fraud. This lack of agility can hinder growth, particularly in dynamic markets.
“The inflexibility of traditional systems and platforms have prevented lots of companies from moving forward and keeping up,” Boost Payment Solutions Chief Operating Officer Illya Shell told PYMNTS in May.
At the same time, only 5% of small business owners have fully automated their AP and AR processes, even though doing so can provide them with the insights and growth opportunities they seek.
The PYMNTS Intelligence report “CFOs Eye Accounts Receivable as New Direction for AI Investments” found that 55% of chief financial officers representing middle-market businesses would be willing to pay 3% of the invoice amount to accept payments using a solution that automates invoice approval and payment.
Checks are also highly susceptible to fraud.
“If you cut out checks, you cut 60% of fraud right there,” Finexio founder and CEO Ernest Rolfson told PYMNTS in July.
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