Where does ACH fit in the B2B payment processing landscape?

This article is sponsored by PayTrace.

As B2B companies have worked to modernize and automate manual processes, the transition to digital payments has remained a stubborn hurdle. Recent research has shown that more than 60% of B2B payments are submitted via paper check or some other manual process, which translates to an average Days Sales Outstanding (DSO) of anywhere from 28 to 60+ days. 

From the merchant perspective, reliance on these outdated approaches creates a range of problems. B2B accounting teams are bogged down with collections processes (sending collection notices and statement reminders, calling customers, etc.) that take extra time and effort and are susceptible to human error. 

From the B2B customer perspective, we’re seeing a disconnected buying experience that feeds into the slow payment cycle. B2B customers want the simple digital payment experience that they get when they shop online. Instead, the B2B customer receives a paper invoice or email, puts it in the “to-do” mail pile or folder, and then forgets about it. By the time they get around to paying the invoice, it’s likely late, causing that high DSO and delaying cash flow. All around, it’s a disjointed and costly process.

B2B merchants need digital solutions that provide faster payments, streamline operations, reduce costs, and enhance security compared to traditional payment methods. Obviously accepting credit cards is a big component of the solution, but merchants can find even more value by supporting ACH payments from their B2B customers as a fast, secure alternative to the paper checks they are so accustomed to using. 

Merchants that accept ACH payments today will send their B2B customer a digital invoice with a payment link. And instead of filing that invoice and forgetting about it or writing a paper check and then putting it in the mail and waiting for it to be processed, the customer can simply click the payment link, enter their ACH details, and they’re done. No late payments, total customer satisfaction, and the merchant gets paid exponentially faster than with the paper check route. And in the B2B space, anything that can help you reduce your DSO and give you faster access to cash, is a huge win.

Another important consideration for merchants is credit card surcharging. To save money on processing costs, many merchants have started to pass on some of the credit card processing fees to their customers. This can vary by merchant but generally it involves a surcharge that the customer pays, anywhere from 1-3% of the total sale price.

What we’re seeing, though, is that when B2B merchants implement some form of surcharging to help offset the costs of accepting credit cards, they find that some customers don’t wish to pay using their credit card anymore. Those customers look for an alternative payment method at a lower cost. Offering ACH payments provides that alternative, maintaining a positive customer experience while protecting the merchant’s revenue. 

For merchants offering a great ACH payment experience, the benefits accrue for all parties. 

• Speed: ACH payments improve customer experience. They provide the simple, digital consumer-like experience that include payment options that customers crave. They want to pay for their B2B purchases the same ways they do for consumer purchases. 
• Savings: ACH payments help reduce costs. From start to finish, it costs an average of about $25 per check to process a paper check, factoring in the time and overhead involved from printing and mailing to the staff involved in receiving and applying payment to the correct account.
• Security: ACH payments help increase security. Compared to traditional paper checks, ACH payments offer a higher level of security. Checks can be lost, stolen, or altered, exposing sensitive bank account information. ACH payments, on the other hand, are processed with security protocols and encryption to protect transaction data, including account numbers. This secure electronic environment minimizes the risk of fraud.

For our clients that have embraced ACH via PayTrace’s Trace ACH solution, the top benefit they realize is a reduction in DSO due to the reduced number of paper checks they process. They also see fewer manual entry touchpoints in their processes as ACH payments are done digitally, which means they have a reduced risk of security and fraud issues, along with fewer mistakes due to human error. From a customer experience perspective, their customers are happy to have another payment option that helps them pay in a more timely manner with fewer manual steps on their end, too. 

Dynamics 365 Business Central customers can deploy Trace ACH with their current payment integration, but also in Trace AR for Business Central, which is available now in AppSource. The solution allows merchants to accept payments, automate accounts receivable, and manage collections with customizable AR aging reports, automated reminders for customers, and automatic payment batch reconciliation. It even lets you provide your customers with a personalized portal to pay and manage outstanding invoices with either a credit card or ACH payment, further fueling customer satisfaction and loyalty.

When Microsoft customers and partners evaluate solutions to their AR pain points, they should start by focusing on moving key metrics like DSO. The evidence from best-in-class merchants has shown that replacing paper with systems that empower customers and encourage digital payments, with a focus on encouraging the benefits of ACH over credit cards. For organizations that make the move, the world of collecting and processing checks and chasing down overdue bills will quickly start to feel like a bad dream.