Do Electronic Payments Cause Payment Delays to Accounts Receivable?

Delayed payments are frustrating to accounting and business owners. Following up with a client, your accounts receivable department may be told that payment has already been sent. Was it sent via snail mail? Has the check been received and but not entered into the books? Or has payment been made electronically and not been matched to the correct invoice? 

If accounts receivable is taking electronic payments, are those payments delaying the process?

Electronic vs Check Payments

Historically, financial payments between two businesses were conducted with an invoice and paper check.  Waiting for a check to arrive, the accounts receivable process is dependent on the postal service and the bank. Once the check has been deposited, how quickly will it clear so that cash or working capital is available?

By contrast, electronic payments are fast, inexpensive, and easier for clients. Although the numbers are decreasing, according to a 2016 electronic payments survey, over half of businesses still use checks for B2B payments.  The same survey indicated:

• 57% of organizations preferred to use same day ACH payments for last minute payments
• 24% used ACH payments to receive a discount on their payments
• 19% surveyed stated they will use same day ACH payments to pay faster

Businesses may also prefer to use credit cards, blockchain, and payment processing platforms that accept several forms of payment including mobile wallets and prepaid cards.

Check payments may cause delays, missing invoice discounts or payment deadlines. Electronic payments, however, come with their own set of challenges.

Electronic Payment Challenges

While electronic payments seem like the wave of the future, there are still some surprising challenges that may explain the lag in adoption:

• Credit card transactions may charge a processing fee per transaction.
• Organizations must utilize an epayment system that is compliant and secure to avoid potential data breaches.
• Tracking transactions may be difficult, depending on the system. 
• Electronic payments may be for several invoices or partial payments.  

With electronic payments, the payment may be received with no identifying information. This means that the payment may be unable to be reconciled immediately.  Add in the complication of disputes or partial payments, the lack of information may cause delays in the payment processing.

Even though checks may take longer to receive, the invoice information is typically included and therefore able to be reconciled with the invoice. The future of B2B payments is overwhelmingly electronic but to accounts receivable, the reliability of good old fashioned paper checks and invoices is unquestionable.

Complex technology may be required to current electronic payment systems to match payments to invoices. The question then remains: can the technology still support ease and efficiency on both sides of the epayment portal?

 At Enterprise Recovery, we focus on simplifying B2B customer payments. Our goal is to increase your Working Capital and reduce Days Sales Outstanding (DSO). See how we resolve delinquent Accounts Receivables and recover commercial bad debt.