When it comes to consumer payments, cash is no longer king (or queen!). From online shopping and bill pay, to using mobile payment apps to split the tab between friends at dinner, digital payments have been fully integrated into our daily lives.
According to McKinsey’s 2022 Digital Payments Consumer Survey, nine out of ten Americans regularly use some form of digital payment, and further adoption is only projected to increase.
However, the story's quite different when it comes to digital payments for business.
Adoption of digital payments for businesses
Digital payments for businesses are gaining traction, but adoption isn’t nearly as widespread. Many companies still regularly cut paper checks to pay bills, even though the process is slower, more cumbersome, and less secure. While reports vary, some show that as much as 81% of businesses still use paper checks for their B2B transactions.
Why the reluctance to leave paper behind?
For one thing, a company’s accounts payable (AP) and accounts receivable (AR) processes require far more oversight and coordination than consumer systems. Also, adopting new methods and concepts–like AP automation, AR automation, ACH transfers, virtual cards, and EFTs–can be daunting.
The fact remains: digital payments can be a game-changer for your company’s AP and AR. So, let’s dive into everything you need to know about digital payments: how they work, the benefits they offer, and how you can implement them in your business.
Digital business payments will only become more widespread, so embracing them now can help boost your efficiency and stay competitive.
What are digital business payments?
A digital business payment is any payment made through digital or electronic means, rather than exchanging cash or paper checks. In a digital business payment, both the sender and the recipient use electronic means to transfer and accept funds.
The 6 main types of digital payment options
When it comes to ePayments, terms and acronyms are often loosely thrown around with little explanation. Let’s break down your electronic business payment options:
Credit or debit card
Card payments have been around for decades and are the most widely-known form of electronic business payments. They’re fast and convenient but typically have higher fees, especially for the receiver.
Electronic funds transfer (EFT)
Using EFT gets your funds from one financial institution to another without any paper money changing hands. EFT payments consist of many financial transfers, including direct deposits (for payroll), debit payments, wire transfers, and ACH payments.
Automated Clearing House (ACH)
ACH payments are digital payments made through the Automated Clearing House network, a secure system for bank-to-bank transfers. A typical ACH transfer takes a few hours to a few days to clear. These transactions do not happen in real-time as some might think, but they are faster, involve less manual labor than paper checks, and typically incur lower fees than other payment options.
An eCheck is simply the electronic version of a paper check, which causes a bank-to-bank transfer of funds via the ACH network.
A virtual card is a 16-digit, one-time-use credit card token that functions as a proxy for a physical credit card. Virtual cards offer a layer of protection and security to card payments because the card number is used only once, and they specify the payment amount and expiration date. They’re typically distributed to the vendor in an email and can also contain relevant remittance information about the invoices being paid.
Virtual accounts are a relatively new digital payment method that allows businesses to deposit funds into a virtual account to make real-time payments with fewer limitations to vendors. Companies can keep a balance in their account to transfer money directly from the account to their vendors without having to withdraw funds from a separate bank account.
How digital payments differ for businesses and consumers
For consumers, digital payment technologies are pretty straightforward. You can send or request money with just a few clicks or taps. On the other hand, online payments for businesses involve layers of approvals, monitoring, and reconciliation.
While business ePayments are far more convenient than traditional paper payments, they understandably have a more complex workflow than digital consumer payments. The good news is that newer technologies—including online payment systems and AP automation—bring consumer convenience to online payments for businesses.
6 reasons why your business should consider digital payments
1. Save money and time
Online payments for businesses can cut the time associated with bill approval by more than 50% and help companies collect money up to 2 times faster.
2. Increase security
Checks are easy to steal, forge, or lose. With digital payments, your financial data and documents are safer on secure, encrypted, password-protected servers.
3. More visibility and control
Online payments allow you to track every step, including everyone who touches it within the company and outside of it—every postal worker, everyone at the vendor’s office, and even the teller at the bank where it’s deposited.
ePayments also provide you with all of the remittance information of the transaction. That includes invoices, invoice numbers, statements of work, the exact date, and time stamping. It shows who approved the payment and who made the payment. There’s no guesswork, only precise documentation of bill review, payment, and receipt, which promotes better cash flow management.
4. Better accuracy
Digital business payments can automatically sync with your accounting software, so the information is never entered twice. This makes paying and reconciling payments more efficient.
5. Streamline international payments
You can pay your international vendors in local currencies, reducing the complexities of conversion rates. They can also use the same processes you use to make domestic payments. International digital business payments can even save you money versus using a bank wire.
6. More convenience
You can make an electronic payment from any computer or mobile device. Payments won’t be held up, protecting your company from late fees and disgruntled vendors. Accepting digital payments is also easier since vendors can authorize business payments to land directly in their bank accounts.
How BILL can help with ePayments and automation
BILL helps companies–from sole proprietorship to enterprise take advantage of digital payment methods and AP automation. We save customers on average 36 business days every year by automating their financial operations.
BILL enables you to create a digital payment system–including ACH transfers, eChecks, and EFT transactions–and combine them with a process that automatically ensures proper review and approval processes.
Coreen Collins, a senior accountant at Thumbtack, shared with us, “In my role, I need to monitor all invoices, payments, and vendors. BILL allows me to do all of that remotely. We’ve taken our whole payables process paperless—even eliminating physical checks. All coding, approval, and payment is done through the BILL system. There is also an app that I can use while on the go. Meanwhile, my staff can answer questions and monitor the status of our payables.”
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