Check out Time: Why CRE Firms Should Stop Writing Checks and Move to Epay

by Erick Bowen 0

“I have literally signed tens of thousands of checks in my career. I’d like to stop doing that. My hand hurts.” — Ken Goldman, CFO, Everbridge

Writer’s cramp isn’t the only concern for commercial real estate (CRE) companies that still pay invoices by check. Checks are more susceptible to fraud and more expensive to issue than electronic payments. Checks are also costly for your suppliers to process, post and deposit — a point that sometimes gets lost.

The median cost of sending a paper check is $3, according to the AFP 2015 Payments Cost Benchmarking Survey. Many organizations put their cost at double that. But here’s the thing – the same AFP study estimates the median cost of receiving a check to be $1.57. If a supplier gets 20,000 checks a month, that’s costing them $30,000, or $1,000 a day.

With that kind of statistical evidence, it’s a wonder B2B check payment didn’t go the way of the VHS long ago, replaced by more efficient electronic methods such as commercial cards or virtual pay. But it’s not as simple as that, particularly in CRE.

In CRE, any one organization can own hundreds of properties; any one management company can be paying the bills for hundreds of property owners. Some of the highest expenses are within non-traditional card acceptance categories, such as real estate taxes, utilities and mortgage payments. On top of that, the supplier base includes “mom-and-pop” service providers such as lawn care and maintenance. And with every property acquisition comes another whole list of vendors, which can number in the hundreds depending on the size and purpose of the properties.

That makes for a lot of moving parts, and the more complex, the more daunting any systemic change is viewed. Understandable, but how much money is left on the table by not switching? The cost and efficiency benefits of electronic payments are too numerous to ignore, and the switchover need not be intimidating with the right tools and the right counsel from your banker.

Are you sure your suppliers are resistant?

The notion that suppliers are inherently resistant to accepting epayments may be more myth than fact. As far back as 2013, Kaiser Associates asked suppliers how likely they would be to accept a card if the customer mandated it. A large majority – 82 percent – said they would.

Are Suppliers More Receptive Than You Think

That mirrors the U.S. Bank experience. When we conduct an Accounts Payable analysis with a client, we consistently find instances of checks being used to pay suppliers who in fact accept card payments. In one instance, we onboarded 80 vendors that the customer had been paying by check for years, unaware they could have been using the card, gaining the efficiencies of electronic payments and earning a rebate.

Lessons learned: (1) if you haven’t undergone an Accounts Payable analysis with your banking partner, do it. (2) If you have but it’s been a couple of years, or a couple of major acquisitions, do it again. Ongoing supplier enrollment from your bank is critical in CRE, where the mix of suppliers changes so much more frequently than in manufacturing or other industries. Make sure your bank has the willingness and capacity to help you keep current.

Smooth the path for your suppliers
The easier you make it for suppliers, the more likely they’ll get on board. Sounds obvious, but how? Streamline the enrollment process. Provide them with low or no-cost enrollment portals. Enable payment flexibility: ACH, Straight Through Processing, virtual card or combinations thereof. Your banker can help determine the right mix.

Most critically, point out what’s in it for them that they may not realize. For suppliers, one of the most important variables in achieving cost-savings is the amount of time between date of sale and receipt of payment. Yes, suppliers pay a merchant discount fee to receive electronic payments, but often as not it is offset by time-value savings – by getting paid faster, they can put that money to work faster.

The time to act is now
Switching to virtual pay and other forms of non-check payment saves operational cost and streamlines back office operations while generating income through rebate and providing benefits to suppliers. The complexity and unique needs of CRE can be addressed and in many cases simplified through today’s payment technologies. It’s time you talked to your payment provider about epay.

Erick Bowen is a sales manager specializing in Commercial Real Estate accounts for U.S. Bank Corporate Payment Systems. Contact him at erick.bowen@usbank.com. For more information, visit our website, usbpayment.com