According to BillingTree's 2016 Collection Agency Operations and Technology Survey, 84% of collection agencies’ collected funds come from processing paper checks. Why is this? Two of the reasons people still pay by check is familiarity and feelings of being in control of money. While accommodating this may make your accounts feel good, it is to both their and your benefit to switch them from paper to electronic payment systems. There are several reasons that you want to do this for the benefit of your business. Switching from paper-based payments to electronic bill presentment helps to manage your business risk in the following ways:
Reduced Cash Flow Gaps
Many businesses, upon examining their books, discover that they are "paper-rich but cash-poor". In other words, they have a good stock of receivables, but those receivables have not arrived yet so the company is depending on incoming checks to meet their financial obligations. This is because it can take weeks or longer to collect receivables. Business expenses continue to accrue during these waiting periods. Employee salaries, administrative overhead, loan repayments, vendor invoices and estimated tax payments still come due no matter what your cash flow is.
By migrating accounts to electronic bill pay this cash flow gap can be closed, thereby lessening the burden of covering everyday business expenses. The more the risk exposure is limited the less need you will have for actions such as drawing from one department to pay for another.
More Secure Verification
By enrolling your accounts to electronic bill pay, they have access to PCI-compliant payment processing and fraud prevention tools. This helps reduce your risk of fraud-related chargebacks. With PCI-compliant electronic bill payment, you can verify transactions in real time as well as take advantage of data security tools.
Fewer Accounting Errors
Paper-based accounting systems can be prone to human error:
- Are all necessary receipts and records collected and available?
- Did any invoices or checks get lost in the mail?
- Is there an accurate time-based record of all financial transactions?
Every oversight, missing check or calculating error increases risk exposure and reduces profitability. When accounts are paid through electronic bill pay all records are easily accessible and sortable. Many times electronic bill processing can be connected directly with accounting software so that up-to-the-minute financial statements can be created easily.
Recurring Billing and Automatic Reminders
One of the benefits of electronic recurring billing is the convenience of simplified collections. Invoices need not be sent nor collection calls made when billing is automatic. Automatic billing also ensures consistency of revenue. Expected business expenses can be scheduled according to the expectation of a guaranteed amount. Your accounts appreciate it as well since they can expect consistent delivery of their bills. This is especially useful with business accounts who can experience busy seasons or company travel. At those times bookkeeping is rarely at their top-of-mind and bills may not get paid on time.
In all, migrating paper-based account collections to electronic accounts receivable has many advantages for both you and your receivable accounts. To learn more about it, contact BillingTree or call us at 877-424-5587.