Cash & Liquidity Management
Published  6 MIN READ
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Payments Outsourcing for Cost Savings and Revenue Generation

by Dawn Lothringer, Treasury Manager, Zachry Industrial, Inc.

Dawn LothringerOver the past few years, there has been significant anticipation that the use of cheques in the United States would decline in favour of electronic payments. While there has undoubtedly been an increase in the use of electronic payments, the shift is gradual rather than seismic, particularly amongst smaller and medium-sized enterprises. One of the challenges is that it is not always easy to convince suppliers and customers of the benefits of migrating from cheques; secondly, the necessary infrastructure and settlement instructions are not always in place.

There are considerable benefits to migrating from cheques to electronic payments, however, not only in the United States, but globally. These include greater efficiency and control over the payments (and collections) process, but the most compelling advantage is often the cost reductions that can be achieved. According to the Aberdeen Group, best-in-class companies are averaging below $2.00 per transaction for payments processing, compared with over $50.00 at the other extreme. Consequently, the business justification for conversion to electronic payments can be compelling.

This has been the experience of Zachry Industrial, Inc. (Zachry). Over recent years, Zachry has centralised and outsourced its payments processing to SunGard, and moved away from cheques to more economical ACH and virtual cards. As a result, the company has eliminated payment processing costs and generates more than $100,000 per annum in card rebates.