Should U.S. Postal Service Woes Make B2B’s Think Twice About Paper Checks?

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  • The USPS’s Uncertain Future May Affect Your Cash Flow

  • The U.S. Postal Service is in trouble. And so potentially are accounts receivables teams receiving paper checks by mail or that have them sent to lockboxes. Mail volume is expected to be down 50 percent in the second quarter because of the pandemic, and Postmaster General Megan Brennan has calculated that the Postal Service will run out of cash by the end of September if it doesn’t receive government assistance. 

While a total Postal Service collapse doesn’t seem likely, disruptions and layoffs could occur without Congressional intervention and federal aid. With annual U.S. B2B payments reaching $25 trillion, and with roughly 40% of B2B transactions still made by paper check, this means that trillions of dollars in B2B payments may soon be unable to rely on a crucial and cost-effective link. So should you be thinking twice about paper checks, especially now?

This is the time to proactively migrate your buyers away from paper check payments. Adopting an accounts receivable system that allows flexible payment options for your customers is essential in dealing with potential USPS disruptions, as well as the paper check’s other shortcomings which have been amplified by COVID-19.

So how do you make it worth your buyers’ while to move away from paper checks? Presenting them with a smooth, seamless automated experience is a start. Here are several best practices:

Accept payment on your website. Customers visiting your website and ordering products should be able to view and pay their balance with ease. You’ll also want to give customers the option of selecting the invoices they are paying which will automate the process of posting remittances to your ERP.

Ask customers to pay with ACH. Your larger customers may refuse to visit your website if they’re buying from hundreds of thousands of suppliers. Instead, ask them to send you payment by ACH/EFT. It’s cheap and quick for both you and them. However, you’ll want to be sure they send remittance to your email address that is supported by a cash application system so you can automatically extract remittance from emails and auto-match the details and deposits for seamless posting to your ERP or accounting system.

Enable your team to take payment over the phone. While a credit rep or collector is talking to a customer, there’s no better time to ask for a payment. While many ERPs support over-the-phone payments, accessing such ERP capabilities while your team is remote can be a challenge. A B2B virtual terminal that is PCI-compliant, offers Level 3 interchange discounts and supports both ACH and credit card payments is essential for distributed teams.

Your company has hopefully adopted some or all of these practices prior to recent events. If so, here’s one more best practice you may not have considered that can deliver tremendous cash flow benefits without a major IT lift.

Accept payments directly from buyer ERPs and A/P platforms. Payments networks make it attractive for buyers to move away from paper checks. A payments network can automatically connect you to many of the different third-party banks, ERPs and A/P platforms your buyers are using to pay you. When your invoice is approved to pay, the payment network captures that payment instruction and moves the money to you the way you already receive ACH or credit card deposits. It then obtains the remittance from those systems, posts it and presents it to you in a format compatible with your A/R process.

Payments are received faster because they’re processed the same day they’re initiated by your buyer. Suppliers also have more control because they can broadcast their payment preferences to A/P platforms via the payments network. You’re also not asking your buyers to change their payment behavior, so you make them happy by being able to easily accept payments from their platform.

As the saying goes: “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.” And while no one doubts the tenacity of our postal workers, unprecedented circumstances may pose a significant challenge, one which should have you thinking twice, not only about the paper check’s future but how you protect cash flow and future-proof your business.

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