Today’s deepening financial doom and gloom can turn out to be a great opening for you to ride in on your cost-cutting horse and save the day.

One of the biggest costs in transactions with suppliers and customers is the physical act of getting paid.

Most businesses still rely on the tried-and-true method of paper checks (and taking advantage of features like mail float time — or being frustrated by the same).

But there’s hard proof that moving away from paper and handling more transactions electronically is more efficient, easier to do, and even safer than using checks.

First, there’s the inherent complexity of the payment process itself. In a 2008 Aberdeen Group study, 76% of businesses described A/P operations as either complex or somewhat complex.

(A complex transaction, in this case, involves two or more banks and more than three payment types.)

Across the board — including Best in Class operations down to industry laggards, electronic payment processing costs were noticeably lower than handling paper-based checks.

• Best in Class companies spent an average of $10.84 on each paper-based check transaction, compared with an average electronic payment processing cost of $6.71 — a savings of 38%.
• Below average operations spent an average of $11.33 on each paper-based check transaction, compared with an average electronic payment processing cost of $8.42 — a savings of 26%.

OK, many of the Purchasing & Procurement folks already know there’s money to be saved by pitching paper. These are some stats to back it up.

But the biggest fear — one that hampers efforts to turn transactions into electronic time-savers — is that security can be compromised, creating chaos for all parties involved.

Here’s some ammo to help shoot down that argument.

When businesses experiencing payment fraud were polled as to the source of that fraud, here’s what they said:

• paper-based checks — 42%
• commercial cards — 33%
• ACH — 6%
• wire transfers — 4%

(Admittedly, there are more paper-based frauds reported because there are more paper-based transactions. But you get the idea.)

Tags: checks, customers, electronic transactions, suppliers