Your Company Writes Checks, So Do it Right

By Ernie Humphrey, CTP, Treasury Webinars

Checks are evil, right? Checks are going away in the near future, right? Until I reviewed the results of a survey in partnership with Stampli, “Payment Strategy: How and Why Companies Make Payments,” I would have answered “yes” and “of course” to those very questions. The survey results have changed my answers to “not really” and “not hardly.”

Thirty-percent (30%) of companies prefer to pay suppliers via check than any other payment type, and 37% of companies report that a main reason they write checks is that suppliers prefer to receive checks. Ninety percent (90%) of 386 companies that participated in the survey make at least 10% of payments via check and thirty-four percent (34%) of companies make at least 50% of all payments via check. Checks may cost more to process and may be the most common target for payment fraud, but companies prefer to use them, and suppliers prefer to receive them. Therefore, it is important that companies process checks as efficiently as possible while mitigating check-related fraud exposures.

There are many costs associated with writing checks and those depend on how companies leverage technology and process checks to remove potential liabilities throughout its procure-to-pay (P2P) process.

The total cost of processing a check can include costs related to the following:

• Receiving invoices
• Reviewing invoices
• Routing invoices for approval to multiple employees
• Reminding approvers
• Accounting for the status of payments
• Routing checks for signature(s)
• Recording checks in accounting software
• Researching/answering vendor questions
• Reconciling check payments with accounting software

The right AP automation solution can empower companies to significantly reduce the costs associated with: receiving an invoice, reviewing an invoice, routing an invoice for approval, reminding invoice approvers to remove processing bottlenecks which enables discounts, accounting for the status of payments, routing checks for signing, recording checks in accounting software, researching/answering vendor questions, reconciling check payments with accounting software, and invoice reconciliation fees. If you would like more detail on exactly how AP automation can reduce check processing costs, please experience the recording of this webinar: Delivering AP Success & Remote Control in the Next Normal.

There are internal, external, and technology-related risk exposures associated with the people, processes, and systems that companies leverage to process invoices which are paid by checks. Three key strategies companies leverage to mitigate these risk exposures are: employee education regarding check exposures and internal controls, leveraging technology to create a clear audit trail for each action related to check processing, and the segregation of duties related to check processing. If you would like more detail about check-related risk exposures and how to eliminate or mitigate these exposures, please experience the recording of this webinar: Payments Fraud 10 Reasons It Deserves Your Attention.

Many companies prefer to pay by check and many suppliers still prefer to receive them. Checks are not going anywhere. Companies need to focus on leveraging the right processes and technology to mitigate check processing costs and the related risk exposures while optimizing control of cash.