Paper checks remain a staple in the B2B payments space, but their inherent limitations are leading some buyers and sellers to seek better alternatives. As a result, the number of buyers paying suppliers with paper checks has dropped 7 percent during the pandemic, PYMNTS reports.
See also: CFO’s Guide To Digitizing B2B Payments
Buyers and sellers are familiar with the many drawbacks of using paper checks. Checks incur the costs of purchasing stamps, envelopes, check printers and other supplies. These expenses can quickly mount for companies that make payments in high volumes.
Checks also take time to reach their destinations via postal mail — sometimes taking several days or longer to reach vendors, creating inefficiencies for both buyers and sellers. These disadvantages have been magnified by the COVID-19 pandemic.
Accounts payable (AP) teams that have shifted to working from home are likely to face more difficulties than ever in generating physical checks. And accounts receivable (AR) teams that have put increasing importance on receiving payments on time to overcome cash flow challenges during the pandemic are not helped by the sluggish delivery of physical checks.
These strains are prompting companies to reexamine their transaction methods. Buyers and sellers alike are seeking smooth, swift, cost-efficient, reliable methods of transferring B2B funds.
One alternative is virtual cards. A 2019 PYMNTS poll of executives found that 22.9 percent listed virtual cards among their most desired AP innovations.
Virtual cards are tools that allow corporate buyers to secure payments by generating one-time codes for each transaction. They enable buyers to deliver payments to vendors much more swiftly than putting checks in the mail.
For buyers, that means they can keep more money in their own bank accounts until the bills become due. That gives buyers some leeway to better manage their working capital, and also eliminates the need to generate paper documents. For sellers, that means they can quickly receive funds and maintain their cash flows, and can also forgo handling paper documents.
Sellers can maximize these benefits by adding third-party tools that enable the automatic processing of virtual cards. These technologies remove friction and enable sellers to seamlessly receive funds. By enabling suppliers to abandon manual card processing and replace it with straight-through processing, these technologies make it quicker and easier for them to accept and reconcile virtual card payments.
Without tools that enable the automatic processing of virtual cards, sellers cannot enjoy all the benefits of this payment alternative. If buyers email or fax their virtual card numbers, sellers must sort through their email inboxes or paper documents to find necessary details. They must then manually input card details into their AR systems, which can be time-consuming.
By promoting the use of virtual cards as an alternative to the paper check and implementing the technologies that enable automatic processing, sellers can maximize the benefits for both themselves and their B2B customers