vice president, product management, AvantGard Payment Services, SunGard’s corporate liquidity business

Tips for Selecting an Integrated Payments Platform

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In my recent blog article, “Why Outsource B2B ePayment Adoption?”, I conveyed the results from a recent SunGard study around B2B ePayments and why more and more organizations are opting to outsource the payments process.  The study included 171 participants spanning a broad range of industry and revenue classifications, with 48% of the respondents from companies with more than $1 billion in revenue.  When asked to identify the top requirement for a payments solution or solution provider, study participants pointed to an integrated platform as the top requirement.

Rather than looking for a specific payment type such as virtual card, companies first want a platform that can handle the full spectrum of payment methods from check to ACH, EFT (electronic funds transfer), wire, virtual card, and SWIFT.  They are coupling this approach with the introduction of a formal vendor enrollment program: a highly targeted campaign to help educate and convert vendors from check to electronic payment.  A solution provider that offers both of these options presents the most effective short and longer term solution to corporations.

An integrated platform is typically a Web-based portal that provides authorized users with a secure connection to manage their payment processing jobs from start to finish.  Using an intuitive interface, payers transfer payment files to be executed in various formats (including spreadsheets).  Within the portal, they can review records prior to payment, release jobs, check job status, choose delivery options and view reports on all completed jobs.

A typical integrated platform splits payables data files, differentiating disbursements to be paid by ACH, EFT, wire, virtual card, or SWIFT from those to be paid by check. Electronic payments are executed, checks are printed and mailed, and electronic confirmations are available to ensure job completion.  In processing the payments, the system assigns each transaction a corresponding trace number – essential for reconciling payments together as a single payment run.

An integrated platform is such an attractive option because it can facilitate the migration of vendors away from checks to a virtual card program.  Virtual cards offer increased security over traditional payment methods with the added benefit of rebates, helping to turn Accounts Payable from a standard cost center to a newfound revenue center.  Virtual card payments drive rebate revenue by taking some of the interchange fees received by the card issuer and sharing with the payer in the form of a rebate check.  While the economic model speaks for itself, the challenge remains in the logistics and operations.

Here are a few more tips on what I think a solution provider should be able to provide in an integrated payments platform:

  • Rebates – Enable companies to earn monthly rebates
  • Bank independence – Allow companies to leverage their existing bank relationships
  • Secure card number generation and electronic delivery – Generate one-time/invoice specific use and unique credit card numbers that are automatically assigned and delivered to your vendors electronically
  • Delivery of remittance details – Electronically transmit remittance advices to accompany all card payments.
  • Simplified reconciliation – Invoice details are available for each card payment to simplify the reconciliation process
  • Fast implementation – Works with existing accounting systems and current payment output files
  • Rapid vendor enrollment - Automated, online enrollment process, making it fast and easy for vendors to enroll and immediately receive electronic payments and remittance information
  • Transaction archive – Provide a secure, online archive of payment transactions, allowing both you and your vendors to access payment history quickly to resolve disputes

Do you have any additional tips on selecting an integrated payments platform? I’d like to hear from you.

vice president, product management, AvantGard Payment Services, SunGard’s corporate liquidity business

Why Outsource B2B ePayment Adoption?

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SunGard recently conducted a study to better understand how corporations were addressing the various challenges around B2B ePayment adoption and the migration to ACH and virtual cards. The study included 171 participants spanning a broad range of industry and revenue classifications, with 48% of the respondents from companies with more than $1 billion in revenue. Not surprising, B2B ePayment adoption continues to elude even the most sophisticated organizations. The study found that internal barriers coupled with lack of knowledge of the available options are the primary obstacles. This finding suggests why more and more organizations are opting to outsource the payments process.

By outsourcing to a single vendor with multiple payment channels, companies can more easily take advantage of the full spectrum of payment opportunities. Perhaps only a portion of the vendor community will initially accept ACH and virtual cards. But by outsourcing to a vendor and utilizing a single platform, companies can actively campaign and over time migrate more of their vendors to electronic payments.

The question on the minds of many treasury and accounts payable professionals is what should they look for in an outsourced payments vendor?  When asked to identify the top requirements for a payments solution or vendor, study participants pointed:

  • first to a requirement for an integrated platform and;
  • second to an embedded vendor enrollment program.

This staged priority model allows companies to take a crawl, walk, run approach with their vendors. Rather than looking for a specific payment type such as virtual card, companies first want a platform that can handle the full spectrum of payment methods including check, ACH, wire and virtual card over both domestic and international payment networks. They are coupling this approach with the introduction of a formal vendor enrollment program, a highly targeted campaign to help educate and convert vendors from check to electronic payment. A vendor that offers both of these options presents the most effective short and longer term solution to corporations.

Are there specific requirements that are more important to you when looking for an outsourced payments solution or vendor?  I’d like to hear from you.

vice president, product management, AvantGard Payment Services, SunGard’s corporate liquidity business

Latest Insight Into Payment Remittance

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The Aite Group recently conducted a survey that analyzed remittance practices, benchmarks and perspectives of US and International corporations.  The findings confirmed some commonly held views but also provided some surprising insights into practitioner’s preferences.

The study was based on 240 U.S.-based companies, 280 companies based outside of the U.S., and a total of 25 financial institutions and other industry participants (e.g., third-party processors, vendors, and industry utilities)

Some of the less surprising findings were:

  • Checks still rule.  70% of B2B payments are still made via check.
  • The lack of structured data and application of standards makes custom coding the norm to improve straight-thru-processing (STP) rates.
  • Midsize and small businesses lack the IT staff to develop automated solutions.
  • Society still worries about exposing bank account numbers to trading partners.
  • Small businesses comprise the highest percentage of business customers and suppliers for U.S.–based companies.  34% of receivables respondents are less than US $10 million in revenue and 40% of payables respondents are less than that same threshold.

Some of the more surprising findings were:

  • 59% of payers at U.S.-based companies allow other companies to initiate direct debits to their companies’ accounts, while only 27% of companies based outside of the US allow direct debits to their accounts.
  • Generally it is the payer who determines how remittance information is exchanged with suppliers.  Suppliers are not in a position of strength when it comes to dictating formats.
  • For both Receivables and Payables respondents, both within and outside of the U.S., having the remittance information when the payment is received is the most important consideration, more so than receiving the information in a structured format or being able to auto-post the information without operation intervention.
  • Of U.S. remittance volumes by channel, only 10% are sent with the payment in an industry-standard format.  56% of remittances must be re-keyed into AR systems! 
  • The most preferred way of receiving remittance information, regardless of business size, is… email!  Email is considered easy and convenient, quick and timely and provides adequate levels of detail.
  • The most preferred way of sending remittance information is mail (for small and medium businesses (< $10M and $10M-$500M in revenues respectively) and email for large businesses (> $500M in revenues). 

The shift from paper to electronic delivery of both payments and associated remittance has been inexorable but slow.  The results of the survey show clearly that the most popular and prevalent form of remittance delivery has the following characteristics:  it’s ubiquitous, it’s familiar, it’s easy to use, it’s reliable, it’s based on a worldwide standard, and it is perceived as free.  As the financial services industry, software vendors and standards groups continue to support efforts to enable straight through processing, it will be important to keep these characteristics in mind.  

How do these findings align with your experience?  I’d love to hear from you.

vice president, product management, AvantGard Payment Services, SunGard’s corporate liquidity business

B2B Payments: Shifting Potential Liability

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There are a lot of things that keep chief security executives up at night including disasters, theft of intellectual property, budgets, compliance, training and securing mobile devices.  Added to this list is a growing awareness of the financial liability associated with a data breach.  There have been well-known reputable businesses who have suffered large-scale data security breaches, some of which have been well publicized but most of which have received little or no publicity.  But they are all victims of the ever-increasing volume of attacks directed at corporate systems.

The April 2012 Update to the Navigant Information Security & Data Breach Report documents this trend, comparing some startling statistics between Q3 2011 and Q4 2011:

  • There was an 88% increase in the number of records breached from quarter to quarter (Q3: 1.02 million records vs. Q4: 1.93 million records).
  • 50% of hacking incidents targeted corporate entities in Q3, while 67% targeted corporate entities in Q4.
  • The average number of records breached per incident increased 71% from quarter to quarter (Q3: 18,253 vs. Q4: 31,069).

The same report analyzes the causes of data breaches and the results show that risks abound internally as well as externally:

  • Theft (40%)
  • Hacking (23%)
  • Public Access or distribution (23%)
  • Loss (8%)
  • Unauthorized Access/Use (3%)
  • Improper Disposal (2%)

As the B2B payments industry has been slowly migrating away from check payments to electronic payments, many businesses have gathered banking information about their suppliers.  This is usually the supplier’s bank account and routing numbers which are needed for processing electronic payments via ACH or wire.  But the very data that enables efficiencies and lowers cost in payment processing now creates a potential financial liability should the A/P system come under attack and suffer a data breach. 

In the past year, we have talked to a number of companies who are attracted to outsourced payment execution in part because they would no longer need to maintain such banking information in their systems.  Shifting the responsibility of securing data to a vendor who has deep expertise in securing financial systems is a very attractive proposition.  Interestingly enough, we also see suppliers who will readily accept invoice payments via a virtual credit card in part because that payment method does not require them to share their banking information.

What are your thoughts on shifting potential liability?  I’d like to hear from you.

vice president, product management, AvantGard Payment Services, SunGard’s corporate liquidity business

Payments Fraud Remains High

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The eighth annual AFP Payments Fraud and Control Survey report was released in March. This valuable survey, underwritten by J.P.Morgan, provides information and trend analysis of payments fraud.  The 2012 survey shows that, for the fifth consecutive year, two-thirds of responding were victims of actual or attempted fraud.  Following are some of the highlights from the report that stood out to me and support the importance of migrating from checks to electronic payments.  The entire report may be downloaded here. 

According to the report, large organizations were significantly more likely to have experienced payments fraud than were smaller ones.  81% of organizations with revenues over $1 billion were victims of payments fraud in 2011 compared with 55% of organizations with annual revenues under $1 billion.  One could assume the reason is that more larger organizations have more outgoing payments and thus more payments subject to fraud.

The report also states that 28% of survey respondents reported that incidents of fraud increased in 2011 compared with 2010.  Checks remain the primary target, with 85% of affected organizations reporting that their checks had been targeted.  The percentages of organizations affected by payments fraud via other payment methods were:

  • ACH debit (23%)
  • Corporate/commercial cards (20%)
  • Consumer credit/debit cards (12%)
  • ACH credits (5%)
  • Wire Transfers (5%)

On a more positive note, 74% of organizations that were victims of actual and/or attempted payments fraud in 2011 experienced no financial loss from payments fraud according to the report.  It also states that among those organizations that did suffer a financial loss resulting from payments fraud in 2011, the typical loss was $19,200.

Check Fraud

Criminals still target checks more than other types of payments.  According to the report, eighty-five percent of organizations that experienced attempted or actual payment fraud in 2011 were victims of check fraud.  That is all the more reason to migrate to electronic payments. 

ACH Fraud

ACH Fraud is not as common.  According to the report, among organizations that were victims of attempted and/or actual ACH fraud in 2011, the typical organization was subject to four ACH fraud attempts during the year.  Only 17 percent of organizations that were subject to at least one ACH fraud attempt in 2011 suffered a financial loss as a result.  ACH fraud occurs typically because of non-timely account reconciliation or ACH return, lack of ACH debit blocks or filters, or lack of use of ACH positive pay.

Card Fraud

According to the report, eighty-seven percent of the respondents indicate that their organizations use corporate / commercial cards for business to business (B2B) payments.  Payments fraud does occur with card payments and the highest amount of card payment fraud (75%) occurred with purchasing cards.  The percentage breakdown of respondents who experienced payments fraud with various cards include:

  • Purchasing cards 75%
  • T&E cards 38%
  • “One card” combining many uses  26%
  • Ghost or virtual cards 23%
  • Fleet Cards 15%
  • Airline travel cards (UATP) 2%

The report also states that typically, the card payment fraud that was reported was committed by an outside party (65%). Only 16% reported that the fraud was committed by a known third-party such as a vendor, professional services provider or business trading partner.  However, a significant amount of such fraud was committed by an organization’s own employees (38% of respondents).

In summary, checks continue to be widely used and abused, and fraud by check payments remains the overwhelming threat faced by companies.  Corporates recognize this and many organizations are simply moving away from checks.  They recognize that most of the float has been squeezed out of the check clearing process, making it more cost effective to focus on other benefits from electronic payments – liquidity visibility, greater automation and cost savings, revenue from rebates as well as the fraud control benefits.

Companies like to use ACH because the processing cost is typically less than that for checks and wires and is also much easier to control via debit filters, debit blocks, and dedicated accounts.  Card networks are more secure than checks, but card fraud attempts vary depending on the type of card program.  The use of virtual cards, with the characteristics of single use, exact dollar amount and short time-to-live does provide a secure alternative for B2B payments.

How do these statistics align with your experience?  I’d like to hear from you

vice president, product management, AvantGard Payment Services, SunGard’s corporate liquidity business

Virtual Card Programs Part III – How They Differ From PCards & Ghost Cards

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In Part I of my virtual card blog series I described the nature of a virtual card program.  In Part II, I described how corporations can use virtual card programs to help generate revenue.  In Part III, I will discuss how virtual cards differ from purchasing cards (PCards) and ghost cards.

Virtual Cards

Virtual cards are just that – virtual!  They are unique card numbers that are tied back to a real card number. The real card number allows the issuer to control overall credit limits and perform billing. Virtual cards are ideal for A/P payments because they can be generated when needed (on a batch or real-time basis) and allow the payer to specify the maximum credit limit (to the penny) as well as when each card number expires. Virtual cards are easily processed by suppliers using their POS terminal or online merchant terminal.  Authorization and settlement occur identically to other card types. 

Most of the time they are single-use, meaning that once the full value of the virtual card has been charged, the card number is deactivated. Typically the cards have a short time-to-live, often expiring at the end of the month following the one in which they were issued.  These features make virtual cards inherently the most secure form of card payment.

Purchasing Cards

PCards are a form of company credit card issued to authorized employees who can then purchase goods and services within certain restrictive limits.  Employees can make purchases that bypass a traditional purchasing procedure involving purchasing requisitions and purchase orders.  PCard programs have made some inroads into A/P.  The idea is to use the PCard to pay for purchases made via the traditional purchase order process.  The payer avoids the work and expense associated with a check payment while capturing the rebate associated with PCard transactions.  However, as an A/P solution for invoice payments, PCards have proven to be sub-optimal because of challenges with integration, automatic reconciliation, spend reporting, compliance and more.

Without the proper restrictions, PCards provide a means for employees to circumvent established purchasing rules, making it difficult for the company to take advantage of bulk pricing deals with a small number of preferred suppliers.  Additionally, purchases made with the PCards may need to be allocated across several departments, which then require a detailed and sometimes difficult reconciliation process to determine which purchases are to be charged to each department.  This reconciliation is especially difficult if Level III data is not passed (Level III data is granular and detailed information about each purchase).

Ghost Cards

Ghost cards are similar to virtual cards in that they do not involve plastic.  They are simply account numbers linked to a high-limit charge account which an organization uses to conduct a high number of transactions.  Sometimes these card numbers are provided to employees or departments so that purchases can be easily charged back to that department.  Other times, the end-user organization will issue the number to a specific supplier or to all suppliers of a specific supplier type (e.g. office suppliers) for ongoing use. 

A ghost card resolves some of the issues associated with traditional purchasing cards.  When spend analysis identifies that a large number of transactions are made with a particular vendor, a ghost card account number may be created to reduce invoices and improve purchasing efficiency.  This ghost card may only be used for purchases from the specific vendor.  This is often referred to as a vertical approach.

Alternately, A/P departments may find that they are getting bogged down processing one category of expense such as travel, event planning, or office supplies.  In these situations, a ghost card account number may be created with a restriction limiting its use to pre-determined Merchant Code Categories.  This is somewhat similar to a traditional PCard but there is not a physical card and the account may be accessed by many employees.  This is often referred to as a horizontal approach. 

Misuse of ghost cards can be further limited by the same controls available for PCards: charge limits, transaction limits, monthly limits, MCC limits and frequency of use limits.  Additional flags may also be generated by ERP systems, such as when a transaction exceeds a predefined threshold.

Leaving the Check Behind

What is the optimal type of card program for an A/P department?  Understanding how various card programs can best serve a corporation is the key to ensuring the best payment methods are utilized. The latest advances in payables technology now enable organizations to easily migrate traditional A/P payments, even those to strategic suppliers, to virtual card.  The use of single use virtual cards as a payment solution for B2B invoice payments has a proven track record of success. Building on that success, the virtual card programs help companies leave the check behind, streamline their processes, continue to move toward hands-off straight-thru-processing, reduce costs, and benefit from new channels of revenue generation.

What types of card program are you using in your A/P department?  If you are using virtual card programs, are you generating revenue?  I’d like to hear from you.

vice president, product management, AvantGard Payment Services, SunGard’s corporate liquidity business

Virtual Card Programs Part II: How Corporations Use Them to Earn Revenue

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In Part I of my virtual card blog series I described the nature of a virtual card program.  In part II, I will describe how corporations can use virtual card programs to help generate revenue. 

More and more corporations are seeing the benefits of migrating paper checks to electronic and now specifically to virtual card programs.  Virtual card technology generates single-use unique card numbers with set credit limits based on the company’s payment instructions.  This approach safeguards each virtual card against unauthorized use and simplifies reconciliation.  A company can earn rebates from check disbursements that are migrated to card payments based on a defined percentage of their total monthly spend.

For example, a corporation with 5000 checks per month at a cost of $1.50 is spending $90,000 per year just to pay invoices by check. By migrating 25% of those 5000 checks with an average check value of $1100 to a virtual card program that has an average rebate of $13.75, a corporation can earn $206,256 year from the rebates – turning the finance department into a revenue generator.   Additionally, by migrating 50% of those 5000 checks to ACH at $.50 per payment, a corporation could save approximately $30,000 per year.

One of the most significant barriers to migrating to a virtual card program however is vendor enrollment.  Having a vendor enrollment strategy in place is key to the success of a virtual card program whether it is in-house or outsourced.  Companies that I have worked with that have migrated to virtual card programs are often surprised at the adoption rate but often pleased as they begin to negate costs and earn revenue.

I often get asked why would vendors accept card payments?  Vendors are actually willing to accept card payments (not a majority, but enough to generate significant rebate revenue).  Some are already accepting card payments from other customers.  Some highly value the relationship that they have with specific customers and will accept card payments to maintain that business.  Others may have enough margin built into their prices that they can absorb the merchant fees.  Additionally, payers can incent their vendors to accept card payments, perhaps by offering different payment terms or by concentrating more of their spend with a vendor if that vendor will agree to accept card payments.

Stay tuned for Virtual Card Programs Part III where I will describe how virtual card programs differ from other card programs.

Are you currently using virtual card programs or thinking of migrating your vendors?  I’d like to hear from you.

vice president, product management, AvantGard Payment Services, SunGard’s corporate liquidity business

Virtual Card Programs – What Exactly Are They?

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Corporations remain under continuous pressure to reduce costs and improve operational efficiencies. One of the easiest ways to do this is by migrating payments from check to electronic. However, I am seeing more and more corporations taking the migration to electronic payments a step further by implementing virtual card programs which can turn their A/P departments from cost centers to revenue centers.

The attractiveness of card program rebates have provided the motivation to use PCard and ghost cards in the A/P arena, albeit with mixed results. Providing a ghost card number to select vendors is one thing – providing it to all of your vendors is another. Concerns over fraud, control, and reconciliation have led to the development of single use virtual cards.

Virtual card numbers are just that – virtual! Like ghost cards, there is no plastic involved. However, unlike ghost cards, virtual cards are unique card numbers that are tied back to a real card number. The real card number allows the issuer to control overall credit limits and perform billing.

What makes virtual cards ideal for A/P applications is that they can be generated when needed (on a batch or real-time basis) and allow the payer to specify the maximum credit limit (to the penny) as well as when each card number expires. Most of the time they are single-use, meaning that once the full value of the virtual card has been charged, the card number is deactivated. Typically the cards have a short time-to-live, often expiring at the end of the month following the one in which they were issued.

Virtual cards offer tremendous security and reconciliation advantages. As they are issued for a specific dollar amount, suppliers may not charge more than the limit on the card. For example, Supplier A sends an invoice to their customer for $2,000. A week later, the same supplier sends another invoice for $3,000. When the supplier receives the card number for the first payment, they might be tempted to process it for the $5,000 total. However, because the virtual card number was issued for $2,000, the $5,000 transaction would be declined. In addition, because it is single use, it may not be used for any more purchases once the $2,000 has been charged.

Additionally, virtual cards may also be configured to allow multiple charges (up to the limit on the card). For example, a card with a $1,200.57 credit limit can be configured to allow only one charge for exactly $1,200.57 or for multiple charges totaling $1,200.57. The behavior of many suppliers has shown that they prefer to enter multiple charges, each associated with a single invoice, when receiving a single payment for multiple invoices. This improves their A/R reconciliation and improves the relationship between buyer and supplier.

Reconciliation is vastly simplified with virtual cards because each payment is now associated with its own unique card number. Most virtual cards allow additional data elements to be passed to the issuer when the virtual card number is generated. Those additional card numbers often include data commonly seen in remittance details, such as – invoice number, purchase order number, reference number, etc. The issuer can provide these additional data elements back to the payer in their statement, making automated reconciliation a reality. The suppliers and their associated merchant acquiring banks no longer need to pass this data back to the issuer.

Stay tuned for Virtual Card Programs Part II where I will discuss how corporations can earn rebates by migrating their vendors to virtual card programs.

Are you currently using virtual card programs or thinking of migrating your vendors? I’d like to hear from you.

Guest Blogger: Marcel Santiz, Manager - Treasury Services Operations, Masco Corporation

Going Green with Electronic Payments – Part II

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In part I of my “Going Green with Electronic Payments” blog article, I described that migrating check payments to electronic can help your company go green (in addition to helping your company reduce costs, mitigate risk, improve operational efficiencies and in some cases earn additional revenue).  There are additional ways that your treasury and finance organization can help your company go green:

Accounts receivable:

  • Encouraging your vendors to pay you electronically will reduce your use of paper and remittance advices that need to be stored and, at the same time, reduce your customers’ use of paper
  • Some companies worry about fraud when giving out their account information but it’s actually very safe if you put debit blocks on those accounts (check with your bank for other security features they may offer such as ACH positive pay)
  • If you receive checks in your office instead of in a lockbox, consider Remote Deposit Capture which eliminates the auto pollution associated with having an employee drive your deposits to the bank

Other green steps that can be taken:

  • Scan your documentation and permanent files, then shred and recycle them.  Be sure to tag your digital files thoroughly so they are easily searchable.  Scanning also provides greater protection to documents in case of a disaster or other unforeseen circumstances
  • An electronic bank account management system (eBAM) can reduce account documentation paperwork by utilizing SWIFT messaging instead of paper
  • Internal documentation such as support documentation for repetitive payment setups can be made paperless by using a workflow-based system like SharePoint.  The same applies to user authorization forms.  This approach also allows auditors to have view-only access which avoids them having to take up your time pulling documents
  • If you have processes that currently result in the generation of multiple pieces of documentation, reengineer the process to eliminate unnecessary portions, consolidate to fewer pieces of paper and use self-inking stamps to add a place for approval or tracking number notations instead of a using a separate sheet of paper
  • Use an Internet fax service so your incoming faxes are converted to electronic documents and e-mailed to you.  This leverages your e-mail archiving for short-term retention, makes them easy to save electronically for long-term retention and you only print the faxes you need to.  In a disaster, it also means that you won’t lose your ability to send and receive faxes, just redirect them to a personal e-mail address

In part I and II of my “Going Green with Electronic Payments” articles , I have detailed many of the methods that can be implemented by your organization.  You may find it easiest to start with some of the smaller steps such as an Internet fax service or document scanning.  Steps like this can reinforce the additional benefits to the organization of being environmentally friendly.  Once that idea has taken root, in a short time, it becomes easier to pursue the larger goals such as an electronic payment initiative, which also has significant cost benefits.  Regardless of your path, start with one or two of these steps and keep moving.  Beginning is the most difficult part; the rest will follow easily once the benefits become obvious.

What steps is your company taking to go green?  I’d like to hear from you.

Guest Blogger: Marcel Santiz, Manager - Treasury Services Operations, Masco Corporation

Going Green with Electronic Payments – Part I

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If you are reading this, you are, most likely, familiar with some of the reasons to “go green” and most of the reasons to migrate to electronic forms of payment.  The fact that you’re still reading probably means that you haven’t gone green or electronic or that you’ve only been partially successful at one, or the other, or both.  If you are a treasury or finance professional, you most likely already know that there are many good reasons to migrate to electronic payments.  Despite this, many companies have not done so.

If you are one of those firms, a push toward “green” in your company can open the dialogue that you may have had difficulty with otherwise, particularly in these times of cutbacks.  Regardless of the true reasons that your company has an interest in “going green”, there are real cost savings to be had in making treasury and finance more environmentally friendly.  In the information that follows, I detail some of the ways that you can help the Earth, and do it, partially, by converting to forms of electronic payments.

Paper checks: environmentally unfriendly

Aside from the obvious use of paper and petroleum used to make check stock and envelopes with windows and possibly self-stick, there are other impacts on the environment that are less obvious such as:

  • Toner use
  • Latent power draw – your printer is probably on 24 hours a day and constantly drawing power
  • Heat – laser printers create a lot of heat due to their fusing units
  • Window envelopes are often not recycled by the recipient even if they do so with other paper products
  • Excess auto pollution if an employee drives your check run to the post office

Electronic payments: environmentally friendlier

  • Electronic forms of payment include ACH, Fedwire, Purchasing Card and Virtual Card
  • MICR Laser printer only turned on when needed for the occasional emergency or manual check
  • No other resources used, such as envelopes other than on an exception basis.  If your remittance data is available in multiple file formats rather than just a text e-mail, you also reduce how many vendors will print the remittance data in their office
  • Side benefits: Reduces or eliminates escheatment and fraud on your accounts
  • Caveat: You may feel that you do not have the personnel, resources or systems security to achieve these goals.  If so, consider outsourcing the function and the conversion of vendors.  Outsourcing or software-as-a-service offerings reach your “green” and efficiency goals while still reducing your costs by approximately 50% or more over printing your checks in-house.  In the case of Purchasing Cards and, especially, Virtual Card payments, rebate structures translate into income instead of expense

Are you thinking of helping your company go green?  Is your company considering migrating from check payments to electronic?  I’d like to hear from you.

Stay Tuned for Part II….