CFOs say digitization improves working capital

While businesses have taken steps to embrace faster payments during the pandemic, a quarter of B2B payments are still made by check.

This problem is most pronounced in commercial real estate, where 34% of B2B payments are made by check. This could be partly due to the large sums of money typically involved in commercial real estate sales.

At the same time, 28% of transactions in finance and insurance are made by cheque, as are 26% of transactions in the industrial and manufacturing sectors and one-fifth of all transactions in the technology.

But the use of checks for B2B payments has declined steadily overall, as have payment methods such as cash on delivery and prepaid cards.

ACH payments, while not entirely new, have seen a resurgence in use as digitization makes them easier to leverage for more businesses, according to 68% of chief financial officers (CFOs ) surveyed by PYMNTS. Digitization has also contributed to an increase in the use of credit cards, electronic transfers and real-time payments.

Why is this shift to digitization important? Among other reasons, it can increase an organization’s working capital.

CFOs have responded to the effects of the pandemic on their businesses by looking for ways to improve their balance sheets, and 38% said one of those ways was by accelerating their company’s payments digitization.

Seventy-one percent of CFOs said they had stepped up their efforts to digitize payments in the past two years, and almost all companies said they received fewer payments by check or cash as digital payments increased. increased since the start of the pandemic.

CFOs also said they expect digitalization to bring a host of benefits, such as streamlined Accounts Payable (AP) and Accounts Receivable (AR) processes, as well as improved customer and partner satisfaction.

Businesses have already noticed gains in several areas, with a majority of CFOs – 91% – saying digitalization has improved payments efficiency and 84% saying it has increased working capital. While CFOs at larger companies are more likely to say reasons for digitalization include improving their balance sheets, companies across all fields have reported improvements in payment efficiency and working capital.

To learn more about the benefits of digitizing payments, download AP Automation Tracker, a collaboration between PYMNTS and Beanworks.