25% of B2B Payments Are Made by Check

While digitization has been a nearly universal pursuit for chief financial officers (CFOs) in recent years, it has played out differently in various sectors. This reflects the fact that every industry has its own set of challenges and pain points.

One key distinction between sectors is the degree to which paper check payments are made. Among four industries included in The Strategic Role Of The CFO, a PYMNTS and Versapay collaboration based on a survey of 400 CFOs, the average for the whole sample was that 25% of B2B payments are made by check.

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That payment method has remained more prevalent in commercial real estate, though, with 34% of B2B payments in this sector being made by check. It is noted that commercial real estate is an industry that often deals with large-dollar amounts. The other three industries included in the study use checks for a lower percentage of B2B payments: finance and insurance, 28%; industrial or manufacturing, 26%’ and technology, 20%.

Digitizing Accounting Operations Leads to Shifting Payment Methods

Overall, among the four industries, 40% of CFOs said the use of checks has become less common as a result of digitizing accounting operations. The use of some other payment methods has also declined, with 78% of CFOs saying cash on delivery is used less frequently and 45% saying the same of prepaid cards.

Other payment methods have become more frequently used. More than half of CFOs say digitization has allowed them to support an increase in the following payment types: regular automated clearing house (ACH; 68%), PayPal (64%), credit cards (64%), wire (57%), ePayables with virtual cards (55%) and real-time payments (52%).

Accounts payable (AP) and accounts receivable (AR) modernization has become a nearly universal pursuit at U.S. companies. A total of 93% of CFOs said they are currently digitizing their accounting operations.

Three specific payments-related areas stand out as immediate priorities, meaning significant shares of firms are currently digitizing them. These areas are invoicing customers and vendors (61%), payment processing (51%) and tracking payments that are both received and due (48%).

Adopting a Wider View of AP/AR Modernization

Nearly 93% of U.S. firms with at least $25 million in revenue are currently integrating digital technologies into their accounting operations. The factors propelling this wave of AP/AR digital transformation are familiar in some ways. The pandemic has provided a motivational jolt to overhaul invoicing and payment practices that have long been mired in inefficiencies and manual and paper-based processes, including a heavy reliance on checks.

The innovations taking place in finance offices today go beyond improving organizational efficiency and productivity, however. CFOs are adopting a wider view of AP/AR modernization, one that is comprehensive, strategic and customer-driven. Payments are no longer viewed merely as a back-office function to be ironed out long after a contract or purchase order is signed. Instead, CFOs view seamless and effective payment capabilities as essential to acquiring customers, maintaining long-term loyalty and accelerating cash flow.