84% of 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 issue is the most pronounced in commercial real estate, where 34% of B2B payments are made by check. This could be due in part to the large amounts of money typically involved in commercial real estate sales.

Meanwhile, 28% of transactions in the finance and insurance spaces are conducted via check, as are 26% of transactions in the industrial and manufacturing sectors and a fifth of all transactions in the technology space.

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

ACH payments, although not exactly new, have seen a resurgence in use as digitization makes them easier for more firms to leverage, according to 68% of chief financial officers (CFOs) surveyed by PYMNTS. Digitization also has contributed to an increase in the use of credit cards, wire 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 pandemic’s effects on their businesses by seeking out ways to improve their balance sheets, and 38% said one of those ways is the acceleration of their companies’ payments digitization.

Seventy-one percent of CFOs reported upping their payments digitization efforts in the last two years, and almost every firm said it was receiving fewer check or cash payments as digital payments have increased since the outset of the pandemic.

CFOs also said they expect digitization to bring with it a host of benefits, such as streamlined accounts payable (AP) and accounts receivable (AR) processes, along with improved customer and partner satisfaction.

Businesses already have noticed gains in several areas, with a majority of CFOs — 91% — saying digitization has improved payments efficiency and 84% saying it has boosted working capital. While CFOs at larger organizations are more likely to say their reasons for digitization include improving their balance sheets, companies across the board reported improvements to payments efficiency and working capital.

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