Bill Payers Are Moving Toward Recurring Payments

Here’s Why Billers Should Take Note

As a business entity that invoices your customers, or a Biller, you already know that you enjoy some great rewards through electronic billing, and even more by offering your customers the option of recurring payments. Electronic billing eliminates the hassles of paper, increases payment timeliness, streamlines documentation, and enhances security. Receiving recurring payments reduces Billers’ DSO by removing the risk of late payments.

But the benefits of recurring payment strategies aren’t one-sided. Payers who pay their bills electronically also stand to benefit, which is why bill payers are moving toward recurring payments with more frequency.

Paper payments are costly.

Individuals and business entities that pay a large number of bills on a regular basis are already familiar with the difficulties of doing so, but they also know that it’s a necessary part of doing business. Ten years ago, the typical organization paid the majority of their bills using paper checks. According to research by the Association of Financial Professionals, 74% of organizations made their B2B bill payments with checks in 2007. That percentage dropped in 2010, however, reaching 57%. And by 2013, only 50% of organizations surveyed by the AFP reported making B2B payments via check. If this trend continues, organizations will pay most of their bills through electronic means in the next few years.

Individual bill payers and consumers still represent the largest group that pays with checks in the United States. According to the 2013 Federal Reserve Payments Study, C2B checks represented the largest portion of checks written, at 43%, with B2B checks representing 32% of all checks written. But as electronic payment methods become more standard, the act of making payments using paper methods is declining. The same Federal Reserve study indicated that the estimated number of checks written had dropped from 33.1 billion in 2006 to 21.1 billion in 2013.

The reasons for this trend are the costs associated with paying bills through paper methods. Some researchers estimate that organizations spend as much as $10 making each check payment, and the costs of check payments to individual payers have long been obvious. To pay by check, money has to be spent on the checks themselves and on postage and envelopes. Often, a trip to the post office or bank is required, which takes valuable time out of the day.

Electronic payments offer convenience and security.

Electronic bill payment offers bill payers a simple incentive to switch: by paying their bills electronically, they can save time and money. There is no need for a trip to the post office or bank and no need to purchase postage. They’ll cut down on the number of checks they have to order from the bank and the amount time they spend producing a payment. If the payer in question is an organization or business, they’ll cut down on the number of hours their staff spends processing invoices and producing payments.

Additionally, they’ll worry less about security issues with electronic payments. When delivered electronically, sensitive financial information is less vulnerable to theft than when it moves through the postal system on a paper document. Billers can present their customers with electronic invoices which can be stored digitally or printed out and stored physically, depending on their preference. And because they are electronic, every statement can be sent through email or even SMS, giving bill payers lasting documentation of all their transactions. There are many benefits to paying bills electronically, but one of the most pronounced is the ability to schedule recurring payments.

Recurring payments are a convenient, cost-saving measure for bill payers.

At first glance, recurring payments might appear to only benefit the Biller. By implementing this measure, Billers can count on fewer human errors, shorter processing times, and more on-time payments leading to better cash flow. But the payer can also reap benefits from recurring payments. There are three main benefits:

  1. Paying automatically is convenient. Instead of sitting down to write checks, enclosing them in an envelope, and sending them to Billers through the mail, recurring electronic payments happen routinely, without the need for human intervention. When each billing cycle begins, all of the requisite information is already in place to make the payment quickly and inexpensively.
  2. Recurring payments can save payers from fees. Billers often institute late fees and penalties for payers who don’t pay on time, but recurring payments remove that risk entirely. Instead of having to remember to pay their bills, payments can be scheduled in advance to reach the Biller exactly on the due date. Also, there is no paper to worry about, so they’ll never have to be concerned about misplacing or neglecting a printed bill by accident again.
  3. Payments will be faster and more controlled. When bills are paid with a check, there is always a delay between the time the check is sent through the mail or delivered by post and the time the money transfers from a payer’s account to the Biller’s. Depending on the number of payments they have waiting to be processed at any given time, this can make it difficult for payers to know where their finances stand and disrupt their record keeping, leading to costly spending mistakes. Since recurring payments are automatic and instantaneous, payers won’t experience financial discrepancies due to processing times and they’ll know exactly how much money they have in their account.

Scheduling recurring payments with a Biller can help payers reduce their risk outstanding payments, which will save them money in the long run. If they send high volumes of payments on a regular basis, they should consider paying them electronically and automating them. As a bill payer, deciding on recurring payments isn’t only a matter of convenience; it can be a sound financial decision.

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