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Opinion: Are you running payables or are they running you?

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In the business-to-business world, checks have long been the preferred method of payment, but the rise of electronic options is changing the payables landscape. While checks still account for 51 percent of B2B payments, usage has fallen by 30 percent since 2004. And it’s projected to be overtaken by electronic payment methods in 2020, according to the 2016 AFP Electronic Payment Survey.

Given the ever-increasing pace of business operations, faster payments are becoming progressively more important to a company’s bottom line. If you’re still using checks, there are several reasons to consider a shift to electronic payment methods.

Payment structures
Purchasing card usage has climbed steadily for years. While there are numerous reasons for the growing popularity of purchasing cards, increased cash flow is becoming a primary driver in a rising interest rate environment. The most direct cash flow benefit of paying by card stems from the extended float period built into the payment structure.

First, the digital systems supporting card programs allow for significantly better data analysis. Real-time spending data can be used to identify expense patterns on a monthly, quarterly or annual basis, which can then be used to schedule payments in advance to ensure on-time payments and to optimize cash flow throughout the year. Beyond pre-emptively scheduling payments, companies can track expenditures with specific suppliers or spending categories. This opens the possibility of using trend information to negotiate better terms with frequent suppliers by shortening payment terms to the supplier while maintaining payment terms to their purchasing card provider.

In addition to data analysis capabilities, commercial cards also offer reward programs that aren’t available with other payment methods. An AFP survey reported that 55 percent of organizations receive cash back on their annual card spend–a benefit foregone by businesses that continue to pay by check.

Finally, commercial card programs also lower administrative costs by allowing companies to streamline payments and reconcile employee purchases automatically.

Cheaper, safer, faster
Beyond the cash-flow implications, commercial cards have other features that can benefit businesses. In addition to rebates and reduced staffing-related expenses, cards also provide cost savings in transaction fees. The median cost of processing a paper check is $3 – double the cost of a purchasing card transaction.

In addition, from a risk management perspective, cards are safer than paper checks. Built-in protections, such as EMV chips and payment controls that allow administrators to closely monitor and regulate card spending, create a fraud risk management infrastructure that is significantly stronger than that of check security systems.

Finally, card programs streamline the payment process and improve both the supplier and employee experiences:

• Payments can be set up in advance and tracked in real time.

• Card programs help to avoid payment-related disputes with suppliers.

• Commercial cards simplify the disbursement of internal expenses.

• Administrators can stay in control by establishing authorization and control parameters for each cardholder.

• Employees don’t need to make out-of-pocket purchases and wait to be reimbursed.

The efficiency, security and improved cash flow opportunities offered by commercial cards make them a powerful treasury management tool.

Brian Hutchin serves as executive vice president and director of treasury management and commercial card sales at UMB Bank. He can be reached at


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