Want to explore the top three advantages of electronic payment systems for your business? Take a look below.
What Are Electronic Payments?
Electronic payments are essentially digital monetary transactions between two parties. There are any number of different factors that might inform a business’s decision to use or accept certain electronic payment types. Electronic payments, or e-payments, offer a number of advantages, including cost and time savings, decreased payment processing errors, and reduced transaction costs.
What Are The Most Common Types of Electronic Payments?
At a fundamental level, electronic payments can be boiled down into four categories:
- Card Payments: Credit and debit cards are the most familiar type of electronic payment worldwide, though their popularity is decreasing among younger generations. Card payments remain attractive partially due to the rewards and rebates that they offer.
- Bank Transfer Payments: The transfer of funds from one bank account to another can be done in a number of ways. ACH transfers are one type of bank transfer payment unique to the U.S. Similar to direct deposits, ACH transfer payments are deposited electronically into the recipient’s bank account.
- Virtual Card Payments: A virtual card is a randomly-generated 16-digit number, or “token,” that can only be charged a single time and only for the specified amount. These protections that ensure a secure and impossible to decrypt payment are part of a process known as Payment Tokenization.
- Cross-Border/FX Payments: FX payments allow businesses to send and receive money internationally via wire transfers, forward contracts, cross-currency transactions, and more. This is especially helpful to businesses working with overseas suppliers and customers.
The Top 3 Advantages of Electronic Payment Systems
1. Reduced Transaction Costs
Paper checks dominate business practices. Large businesses make half their payments via paper checks, while small businesses make 80 to 90 percent of their payments via paper checks!
Paper-based payments are a hassle for both businesses and suppliers. Though there are many disadvantages to using checks for B2B payments, collecting and processing paper checks is an extremely costly activity for most businesses, costing about $5 to process a single check. Not only are paper-based payment methods expensive, but they are also slow. It can take upwards of two weeks for a check to clear.
By contrast, accepting electronic payments is relatively simple. Digital payment methods have the advantage of being faster, safer, easier to collect, and less expensive to the business. By incorporating electronic payment methods into your business’s account payable process, your AP department can realize saving on every invoice.
2. Secure Transactions
Electronic payments are much more efficient and safe than their traditional, paper-based counterparts. Electronic payment methods and systems offer multiple ways of securing your payments, such as payment tokenization, encryption, SSL, and more.
Although digital solutions are not immune to hackers and security breaches, most electronic payment providers also have a host of data experts and engineers working to keep your payment information safe.
Transparency is an essential factor when it comes to supplier payments, electronic or otherwise. When you automate electronic payment processing, you gain greater insight into each step of the invoicing process. Automated processes provide greater control over outgoing cash flow compared to tedious, error-prone manual processes. This combination of process transparency, greater control over payments, and reduction of manual tasks means that it will be easier for your AP department to identify suspicious or fraudulent activity.
3. Saved Time and Resources
By adopting electronic payment methods, your business saves time for its teams, its customers, and its leadership. Processing supplier payments the traditional way takes a lot of time.
The average AP clerk saves an hour a day by automating their department’s accounts payable process, however, this will vary widely based on invoice volume. That means, by automating your accounts payable, that you can save up to 20 hours a month to do things other than stuff envelopes and run around the office for approvals.
With a modern electronic payment solution, much of the repetitive and manual tasks that plague accounts payable departments are automated, giving you and your accounts payable department more time to focus on important value-add areas of operations.
If spending up to ten full workdays a year on antiquated accounts payable tasks doesn’t convince you that it’s time to switch to an automated process and embrace the advantages of electronic payment methods, then watch the webinar (below) to learn even more benefits of electronic payments.