As we continue to move forward and away from The Great Recession, businesses have learned how to generate greater value with fewer resources. It’s part of the reason we continue to see confusing statistics in the news. “Economic Growth: Positive… Employment: Negative.” This may be part of the growth process as we hop back out of the nest and start to fly again, or it may just be the new norm. I’ll leave this topic for future economists to debate, but today, I have clients with real needs. “How do I reduce cost and improve efficiency when making payments?”
I recently sat with a client for a relationship review. Like many businesses, he had a number of regular suppliers that he purchased from. My client would sit at his computer weekly and begin making payments. He’d generate laser checks from his A/P system, sign the checks and stuff them in envelopes. He’d apply postage and dump the checks in a bin to be mailed out. But THIS time our conversation was different. He had recently received a call from one of his suppliers about using electronic payments, and he was finally ready to discuss the benefits of ACH payments.
I started by explaining that an ACH is an electronic transfer of funds similar to a wire transfer. A business sending an ACH as a form of payment would need some information from him in order to make sure the payment went into his account. Although he has a long term, positive relationship with his customer, giving out that kind of information went against everything my client knew about fraud prevention. After a brief conversation about an account number masking service called UPIC, my client seemed to be much more comfortable with the idea of letting his customer pay him via ACH and in turn, he understood that many of his suppliers might feel the same way about him.
We moved the conversation back to his business and how he might use ACH payments as a way to save him time, money and improve efficiency.
We discussed the various ways he could generate the ACH payment file and quickly found that his A/P system had the ability to generate a file that could be transmitted to the bank with a few simple clicks of the mouse. Time savings? Almost certainly.
Cost Comparison - for anyone that’s familiar with ACH, you know this can be fairly significant. We compared the cost of check stock, ink cartridges, envelopes, postage and more. Conversely, the cost of the ACH was pennies on the dollar. We identified hundreds of dollars in potential monthly savings from making the switch.
From an efficiency standpoint, we discussed a number of possibilities. Much of the process was web-based. He could make ACH payments from virtually anywhere and anytime that he had his laptop. We also discussed the possibility of him delegating the creation of the payment file to someone else in the office, while still offering him the security and peace of mind he required as the final approver to release the file to the bank.
For this client, it was a relatively easy decision. But whether he makes the switch or not, I continue to build our relationship and grow in my role as a trusted advisor. If you have questions, just ask. Any Provident Cash Management professional would be happy to walk you through the process and ease your concerns. It’s what we do!
Ryan Hayward is Vice President, Corporate Cash Management Officer at Provident Bank. Based in Provident's Iselin office, Ryan's daily routine includes consultative cash flow discussions with financial decision makers (Treasurer, Controller, CFO, etc…) to help improve the efficiency of internal financial process and make cost savings recommendations. Ryan also has an extensive knowledge of data security and financial fraud prevention.
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