This has been a tumultuous time for businesses amid challenges stemming from the pandemic, inflation and staffing and supply chain issues—and the full impact will not be understood for some time. One thing that’s abundantly clear is that this period of unexpected change (like others before it) proved to be a powerful catalyst for the growth of digital business payments and other innovations.
Just as COVID-19 accelerated consumer use of digital payment methods, including ecommerce payment solutions and mobile payments, we have seen organizations fast-track innovations within their own business models to incorporate efficient, digital, real-time payment solutions and products. To gain synergies from the adoption of new technologies, adapting processes in an ever-evolving digital economy, Canadian businesses have the opportunity to embrace a shifting market.
As business payment processing becomes increasingly digital, operational efficiencies will naturally follow. Streamlined, automated processing will become the norm, eventually replacing manual processing and reconciliation.
The idea of waiting days for a cheque to clear or an Electronic Funds Transfer (EFT) to process, will feel as limiting as the idea of relying purely on personal cheques for buying groceries. Routine business payments, like supplier payments, payroll, benefits, and expenses, will have the option of being processed in real time, and will be coupled with rich remittance information to streamline record keeping.
The future of business payments is taking shape — and it’s fast, reliable, secure, and efficient.
Faster business payments are already starting to deliver benefits to businesses of all sizes, from one employee to tens of thousands. Increased access to cash flow and straight-through processing ultimately has a positive impact within the economy at large. Why is this so important? Current payment processing methods (which include cheques, paper invoices, cash, electronic funds transfer and other traditional methods) are costing Canadian businesses an estimated $3 to $6.5 billion per year, according to Payments Canada. If even a portion of these payment processing costs are reduced, it represents a large potential savings for Canadian businesses.
Opportunities to Improve business payments efficiency abound
As owners, managers, bookkeepers, and accounting professionals can attest, embracing digital payment processing alternatives to cheques, EFTs and other payment methods can boost efficiency when it comes to:
Paper invoices: Figures vary, but estimates of the true cost when an accounting department processes and reconciles a paper invoice run as high as US$53.50.
Cheques: The true cost of processing a cheque is $15, according to a recent Payments Canada report. Yet, despite concerns over cost and speed, cheques are still the most widely used method for many types of business payments: Fifty-seven per cent of Canadian businesses reported that they still use cheques for payments, including 71 per cent of small- and medium-sized businesses.
Manual reconciliation: Right now, accounting software, online banking, and other systems do not yet “speak the same language.” As long as this remains a barrier to streamlining, there will be siloes between different payment activities, including accounts receivable and payable, payroll and expenses that need to be manually reconciled.
Canadian businesses are ready for faster payments solutions
Decision-makers in businesses across Canada confirmed these sentiments and more in a recent Interac survey.** They are frustrated with payment and account reconciliation processes lacking efficiency, timeliness, and transparency, and they wish better software integration were possible.
Forty-six per cent of those surveyed agreed that reconciling payments is time-consuming, and a roughly equal amount (45 per cent) acknowledged that many payment processing activities — for example, writing cheques — can be tedious (which will not be a surprise to readers who work in accounts payable [AP] and accounts receivable [AR] departments).
How faster business payments will power the digital economy
The alternative is a smoother, more efficient future for Canadian businesses, whether they are a sole proprietor or employ 10,000 employees. As they adopt payment solutions and enhanced processing capabilities in the coming years, Canadian enterprises will strengthen their competitive position in a number of ways:
Real-time business payments: Real-time payments offer several advantages to businesses of all sizes. For businesses that need to send faster payments on short notice, the current cost of wire transfers can be an issue. Faster payments can also lead to faster customer service in the form of rebates and refunds, for retailers large and small.
Improved cash flow: With faster payments, businesses are better able to manage and leverage their cash flow, thanks to increased business payment processing speed and predictability. When working capital is freed up sooner, businesses benefit from efficiencies in cash flow, the management of fast and predictable cash flow and the ability to take advantage of just-in-time payments — no more waiting for cheques to clear or EFTs to process.
Higher limits on digital transactions: It’s easy for most Canadians to imagine what this would look like – Interac e-Transfer is used daily for everyday transactions like rent or paying your dog walker. With optimizations for business use, organizations can tap into the same convenient experience, but with the ability to send much higher amounts — reducing the need to mail a cheque.
Rich remittance data: ISO 20022 standards enable everything from automating routine payment processing actions, such as account reconciliation to settling employee payroll, expense reimbursements and bonuses in real time.
More environmentally friendly: Invoices that can be reconciled, along with the payment, don’t require a separate paper trail — which also means they don’t require paper!
In the big picture, as businesses gain alternative payment solutions that increase efficiencies, they will be freed up to reinvest those resources more productively — which will benefit consumers, governments, and Canadian society at large.
** The Interac Commercial Payments Research: SME Survey was an online survey of 561 financial decision-makers and influencers in Canadian small and mid-sized businesses recruited via an online research panel, and was conducted between May 5 and 21, 2020.