In today’s business environment, effective payment methods are essential.
Outdated payment systems can create cash flow challenges, while digital payments offer streamlined processing, enhanced operational efficiency and improved customer experience.
The PYMNTS Intelligence report “Getting Paid: Digital Payments for Improving Cash Flow and Customer Experience” examined how digital payments are reshaping accounts receivable (AR), offering insights into reducing days sales outstanding (DSO) and building stronger business relationships.
Outdated Payment Methods Hinder AR Efficiency
Despite the growing adoption of digital solutions, many businesses still rely on outdated payment methods, such as paper checks. This dependence continues to create issues for AR management. According to the report, 75% of organizations still use paper checks, despite their high costs and inefficiencies. The manual processing involved with checks results in slower transactions, increased potential for errors and longer DSO, adversely impacting a company’s cash flow and financial stability.
The drawbacks of paper checks are evident in industries like construction, where 76% of subcontractors receive payments through checks. This method led to a staggering $273 billion in losses due to slow payments in 2023. Additionally, costs associated with issuing checks — ranging from $4 to $20 per check — exceed the minimal cost of digital transactions, which is about 30 cents per transaction. This discrepancy highlights an opportunity for businesses to transition from legacy payments to more efficient digital alternatives.
Digital Payments Cut DSO and Enhance Cash Flow
Switching to digital payment channels can streamline the payment process, effectively reducing DSO and improving overall financial health. Consider 83% of firms said adopting fully electronic payment processing is essential. Digital payments not only speed up transaction times but also enhance payment reliability and accuracy.
The growing preference for digital payments among vendors underscores this shift. Approximately 79% of vendors prefer digital payments, such as wire transfers, automated clearing house transactions and virtual cards, due to quicker processing times. Digital payment portals enable suppliers to receive payments easily and securely, offering features like supply chain financing and discounting to encourage timely payments. These advancements contribute to better cash flow management and stronger business relationships.
A study by Citizens Financial Group showed that 97% of middle-market firms that adopted digital treasury processes saw improvements in cash flow processing, with 96% noting better financial visibility and control. This level of efficiency is important, as 94% of treasury departments using checks plan to transition to digital payments within the next five years. Instant payments further improve transaction speed and efficiency, with 77% of mid-sized businesses adopting such methods this year.
Enhancing Customer Experience Through Digital Payments
Digital payments are proving beneficial not just for operational efficiency but also for strengthening customer relationships, the PYMNTS Intelligence report found. In B2B transactions, digital payment options have been shown to boost customer satisfaction and loyalty. Seventy-two percent of business buyers are more loyal to companies that offer their preferred digital payment methods, while 91% of manufacturers deem real-time payments essential for improving supplier relationships.
For small- to medium-sized businesses (SMBs), digital payments are becoming a key competitive advantage. Fifty-four percent of SMB owners would switch banks for same-day ACH payments. Additionally, 90% of SMBs prefer receiving B2B payments electronically, and 78% opt for electronic payroll. The growing use of artificial intelligence in payment systems underscores a broader trend toward digital transformation.
