Further Reduction in Paper-based Cheque Payments Possible, Says JP Morgan

JP Morgan has released a new report that highlights how businesses are using payments technology to improve working capital, increase visibility into cash management, and generate higher rebates on accounts payable (A/P) spending. The report, ‘Payment’s New Land of Opportunity’, features case studies from JP Morgan clients that have implemented single-use accounts and extended the use of their purchasing card programmes to hold on to cash longer, pay suppliers sooner, increase rebates and reduce A/P manpower costs.

“Corporate treasury departments are under great pressure to manage costs, control spending and increase working capital,” said Eduardo Vergara, global commercial card executive, JP Morgan Treasury Services. “Card programmes are becoming the payment tool of choice as organisations increasingly migrate higher-value, paper-based transactions to electronic payment with complete confidence.”

Until recently, the prime focus for treasury departments has been at two ends of the payment spectrum. Credit cards have traditionally been used for travel and entertainment and some low-dollar expenses, while automated clearing house (ACH) has been reserved for the high-ticket, direct suppliers. Cheque processing, renowned for its high cost and no revenue benefit, has filled in all the gaps. Now, companies see a new land of opportunity: the fertile ‘middle ground’ of payment, encompassing a wide field of transactions that have, until this point, been handled by paper.

According to the report, the answer for many companies is to target the large, untapped middle ground. This is the spend landscape that falls somewhere in between low- and high-ticket transactions, with suppliers that invoice regularly but may not be high-volume vendors. To address this opportunity, companies are using two payment solutions, working in tandem: purchasing card and single-use accounts.

Highlights from the report include:

  • Companies are looking beyond traditional spend categories and targeting non-traditional suppliers for purchasing card payments. Some companies are capturing higher rebates and paying vendors more quickly by using purchasing cards to pay for temporary employment services, utilities, employee drug screening, on-premise security services, legal service providers, advertising and modelling agencies.
  • Companies using single-use accounts report results such as more efficient A/P processing, improved fraud protection, increased working capital and larger financial rebates.
  • Single-use account rebates can be significant. Some companies are earning 100 bps on their larger, indirect purchases.
  • Participating suppliers can be paid 15-20 days earlier through single-use accounts, improving the company’s days payable outstanding (DPO).


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