Even though the use of paper checks for business payments has been slowly declining, most U.S. companies are still using them for 50 percent or more of their vendor payments. There’s a huge opportunity for process efficiency and cost savings by cutting back on checks and automating payments with cloud technology—even bigger than most organizations realize.
According to companies and analyst firms that have done the math, the cost is anywhere between $3 and $5 per check, depending on the organization. This includes line items like check stock, envelopes, ink, printers, postage, and the time of the person who's dedicated to tasks such as check printing, envelope stuffing, and the mailing process. There are also several less transparent costs that take a lot of time to peel apart and understand.
Most organizations don’t try to add up the obvious costs, let alone the hidden ones, because they see check writing as a cost of doing business. Other organizations don’t believe they have any viable alternatives. While this was true for a long time, with today’s technology, it no longer is. When you wrap in the hidden costs of check writing, the ROI of automating payments is probably double what you thought. There are at least six hidden costs that can drive the true cost of check writing up dramatically, hurting your business in the process.
When you think about these hidden costs, it’s clear that check writing is not only costing businesses money, it’s costing them the ability to run their business efficiently and scale effectively. So why have so few companies taken a hard look at these costs? For the same reasons that AP has barely changed in 50 years. In most businesses, everybody thinks about the revenue-generating side. Fewer people think about cost avoidance and efficiency.
In the case of older businesses, where people have been writing checks forever, they just don't think about it at all. You have to pay people and up until very recently, there have been no alternatives other than partially automated ACH or credit card programs offered by banks. If there’s no alternative, why would you spend any time at all evaluating your costs?
In younger companies, where technology is part of their DNA, people are more likely to think, “There has to be a better way of doing this.”
With today’s technology, there is. Payment automation is one of the easiest things to implement and provides an immediate impact to bottom line. You can literally transform the massive effort that goes into writing checks with a few hours of AP’s time. There are very few technology implementations you can say that about. Once completed, organizations are able to make all their payments in a single automated flow with visibility, traceability and control, freeing up a tremendous amount of money and time for other, more productive tasks.