Riding the Wave of Digital Payments
Modern accountants are technologists as much as practitioners. They create efficient, responsive and mobile firms, thanks to cloud-based apps that do everything from online bill pay to workflow automation. The accountants on the forefront continually seek new tools to differentiate their practices, enhance the customer experience, and offer new services such as outsourced accounting.
Firms are applying this strategy by embracing new ways to pay the bills.
The Rise of Modern Business Payments report surveyed more than 460 accountants and bookkeepers. It asked them how they pay the bills for firms and their clients.
The results: Digital payments for bills are mainstream, and new ways to pay such as cryptocurrencies and virtual credit cards are gaining momentum.
This state of digital payments makes sense when thinking about how technology always seems to come in waves. In this case, we can literally compare bill payment technology to an ocean wave, with three forces at work: the friction from below of the old and inefficient ways, the swell of wave energy that represents the mainstream, and the fast-moving crest of the wave that overtakes the swell.
ACH transfers, online banking, and more
Before we delve into digital payments, let’s address paper checks. In this metaphor, checks are the friction, the slowing of motion that leads to the next wave. Yes, accountants still use checks to pay their own bills and their clients’ bills. However, handwritten and computer-printed checks are the top two methods of payments used less this year compared to last year. Check usage is declining and only 6 percent of firms don’t use any form of digital payments to pay bills for clients.
Meanwhile, the report reveals that accountants are paying online more frequently. Naturally, this is our swell, the forward momentum of mainstream technology that we witness in our daily lives. The survey shows evidence of this assertion with the following results:
- 73 percent of firms use ACH transfers and online banking to pay bills for clients
- 64 percent use ACH transfers and 80 percent use online banking to pay bills for their own firm
New frontiers for digital business bill payments
ACH and online banking are mainstream. Checks are the drag from below. What’s next in our wave of digital payment technology? The crest!
Emerging digital payment options like virtual credit cards and cryptocurrencies have gained prevalence with accountants as the fast-moving edge of the wave. Let’s take a break from the ocean and define these emerging payment technologies.
A virtual credit card is a 16-digit credit card token used as a proxy for an actual credit card. A virtual card is typically distributed to the vendor via an email, which also contains relevant remittance information about the invoice being paid. The token can only be used once for the exact amount and comes with a fixed expiration date.
Cryptocurrencies reside outside of the control of banks or governments and are primarily exchanged online. Examples of cryptocurrencies include Bitcoin, Ethereum and Ripple. They are stored and transferred via blockchain, a decentralized database that spreads across multiple networks. Each cryptocurrency exchange is captured, timestamped and connected in a blockchain and serves as a permanent public general ledger.
The data shows the early signs of a new breaking wave of digital payment methods:
- 10 percent use virtual credit cards with the same frequency or more than last year to pay firm bills
- 3 percent use virtual credit cards more than last year to pay client bills
- 3 percent use cryptocurrency with the same frequency or more than last year to pay firm bills
- 1 percent use cryptocurrency more than last year to pay client bills
Accounting and digital bill payments—the push for efficient and profitable practices
Why are accountants recommending and adopting digital payments for business bills? They make it easier for practitioners to do their jobs.
The report reveals the top three reasons why:
- Increased speed in processing and reconciling payments
- Ease of working with an all-digital system
- Handling digital payments anytime, anywhere
With digital payments and cloud-based solutions, accountants can automate, streamline and collaborate with clients far easier than compared to paper-based payments. In fact, they can cut the time associated with bill payments in half while benefiting from automatic audit trails, permissions-based access, integrations with other accounting software, and positive pay and advanced fraud detection. This means it costs them less time and money to handle digital bill payments.
Why is saving time and money on bill payment important for firms?
Accountants realize that paper-based processes aren’t sustainable in the age of the cloud. Thanks to our current wave of technology, more firms are expanding their services to include bill payment as a standalone or a component of client accounting services. If they can’t efficiently process bill payments, it hinders their ability to offer a valuable service at an accessible fee for clients and prospects.
Technology is also changing how accounting firms charge their clients, with many moving from hourly rates to a subscription type of fee that recurs on a monthly basis. Firms are even changing their criteria when hiring new team members. Instead of hiring solely for CPAs, future-forward firms are diversifying skill sets to include employees with technology and training experience.
While all accounting professionals may not embrace digital payments yet, the survey shows that digital payments are in the mainstream swell of the wave, with a majority of firms using them on a recurring basis and a small fraction on the crest, pushing even further into newer methods. Download the Rise of Modern Business Payments report to discover what other new approaches accountants are taking to pay the bills.