8 advantages of digital payments for your business

Using traditional payment systems to manage your payments and expenses can be time-consuming, especially when paper-based resources are involved. Tracking down supplier payments, reconciling checks, and monitoring employee spending ties up valuable time and resources.

Using electronic payment systems can prevent or solve many of the challenges of paper payments.

What are the benefits of electronic payment systems?

There are many benefits to adopting digital payment solutions. Electronic payments can help you:

1. Reduce the risk of fraud from checks.

Traditional paper checks pose fraud risks for a number of reasons.

First, they are generally handled by people at several points in their journey.

Second, they carry a lot of important information, including account numbers and signatures.

And third, they can be stolen or forged without a lot of creativity or technical knowhow required.

Using direct deposit to pay your employees is one simple way to reduce the need for paper checks at your business.

2. Take advantage of vendor discounts through faster payments.

Checks can take several days or more to reach vendors. For those that offer discounts for early payments, those days can cost you. Processing electronic transactions can take just seconds—including same-day ACH payments of up to $1 million.

You may also be able to earn discounts through rewards programs or loyalty programs—incentives that may also be delivered to you electronically, in the form of digital gift cards, for example.

Note: Vendors who aren’t set up for electronic accounts receivables management may be an obstacle at times. Yet as more companies view digital payments as the key to healthy cash flow and success, they’ll become the standard means of payment.

3. Enhance purchasing decision-making by offering clear visibility into your payment and collections data.

Smart financial moves start with a clear view into your payments and collections. Transparency not only builds loyalty among your vendors and customers, it helps you identify payment behaviors that inform cash flow forecasting and planning so you can spend where you need to, when you need to. Visibility into your payment and collections data also lets you identify and assess payment issues ahead of time, lowering your risk of late or missed payments.

4. Reduce financial processing and direct labor costs.

From invoicing to disbursement, digital payments are simpler and require less processing time, especially when set up with automatic reconciliation. Traditional payment processing can be time consuming and costly, especially when a business is processing hundreds of payments each month. What once took hours can now be done in minutes. Plus switching to digital methods can eliminate the need for tracking down or seeking replacements for misplaced paper checks, which can get lost in the mail, behind a desk, or in the wrong file drawer.

Shifting to electronic payment has many advantages, including financial accuracy, faster settlement speed, and fraud prevention. It's also the best way to ensure you have money to fund your business.

5. Control employee spending with electronic purchasing and payment cards.

Business credit cards offer transparency and provide you with a better understanding of your company’s expenses. The reporting associated with electronic payments can also streamline your cash flow management by minimizing the hassle of expense reports and receipts. Remember: Limiting employee spending is an easy way to improve your cash flow.

6. Hold onto cash longer.

Improve your cash flow cycle by implementing precisely timed payments. Real-time payments help you plan and map out when vendors are paid so you can keep cash in your business longer or take advantage of early payment discounts.

Data collected by electronic payment systems also means you can predict and manage your cash levels precisely with more accurate information.

7. Integrate with financial software and online banking tools.

Electronic payment systems can be integrated with your financial software and online banking tools to give you an up-to-date picture of your finances.

Real-time financial reporting helps you manage your cash flow better so that you can keep your business operating smoothly and efficiently.

8. Allow for growth and increase your company’s value at every stage of your business lifecycle.

Payment strategy is the core of your operating and cash flow cycles. Whether squeezing your balance sheet to fund growth, controlling your financial and administrative costs, or protecting your business from fraud, start by transitioning to electronic forms of payment.

Financial and capital efficiency, along with improved cash management through electronic payments, can help increase your company’s value.

What are some common forms of digital payments?

Switching to electronic forms of payment isn’t something you can do overnight, but there are some easy ways to get started. If you’ve already implemented these in your payment strategy, talk to your relationship manager about possible next steps.

• Business credit cards. Using credit cards to pay your vendors is one of the most easily implemented methods of electronic payment.
• ACH payments. Ask your vendors if you can pay with ACH drafts or wire transfers for same day or scheduled payments. Electronic data interchange (EDI) software can eliminate paper purchase orders and invoices.
• Direct deposit. Your bank can facilitate electronic payroll transfers to your employees, eliminating the need for paper checks.
• Consolidated payables. You can send your bank a single electronic file to automate disbursements—card, ACH, wire, or check—for each payment cycle.