Are you still sending paper invoices to your customers and waiting for paper checks to arrive?
If so, you’re not alone—especially if you’re in the B2B world. More than half (51%) of B2B payments are made by paper checks, according to the 2016 AFP Electronic Payment Survey. Among small businesses, the figure is much higher: One study reports that 97% of small companies still use checks to make and receive payments.
Overall, paper-based B2B transactions cost businesses $180 billion a year. In addition to eating up trees, wasting money and filling landfills, checks are also the leading method for payment fraud, according to J.P. Morgan Chase.
Clearly, there’s a lot to gain by expanding your customer payment options beyond paper checks to electronic payments. Here’s what you need to know about electronic payments, and how to use them to get paid faster.
How Electronic Payments Work
ACH (Automated Clearing House) transactions move money electronically from one bank account to another. (The terms ACH and EFT, for electronic funds transfer, are often used interchangeably.)
To set up an ACH debit transaction, your customer gives you their bank routing or checking account number and authorizes you to set up the transaction.
ACH payments typically cost less for businesses to process than credit card transactions. They are also more secure than paper checks and easier to track because of the electronic records.
However, because there’s a bit of a process involved with setting it up, it’s best for recurring rather than for one-time payments. For example, if you have a client on retainer that pays a monthly fee, you can set them up with a recurring ACH payment that automatically withdraws the money from their specified bank account on a certain day of the month.
How to Get Started
If you have a large volume of receivables, you may want to set up an online portal for your customers to login and pay you via ACH debit or credit card. Alternatively, customers can pay you through their business bank’s online payment app. If you are registered with their bank, the payments can be made by ACH; if you’re not registered, the bank will send you a paper check.
Start by talking to your existing business bank to see what solutions they offer. There is also payment processing software for ACH and online payments. Payscape, Authorize.net, QuickBooks Payments, Omnifund, PaySimple and Bill.com are popular payment processing solutions.
According to an industry survey, 80% of accounts receivable managers would prefer to receive payment by ACH — but your customers may not want to pay you that way. Some customers want to pay by credit card to buy themselves time and keep the money in their accounts longer. If you’d like to get paid right away while still giving your customers some “float” time, Fundbox Pay could be an ideal solution.
All you have to do is sign up, enter your bank account information, and get your customers to sign up by explaining that if approved for Fundbox Pay, they’ll get 60 days to pay you with flexible financing. But you won’t have to wait 60 days: When your customer makes a payment using the Fundbox dashboard, Fundbox pays you the amount of the invoice (minus a fee) as soon as the next business day.
ACH transactions are expected to surpass checks as the primary payment method for B2B customers by 2020, and paper checks are projected to disappear altogether by 2026. Make sure your business isn’t left behind by offering customers the convenient mobile and electronic payment options they want most.