One of the factors fueling the migration from checks to business-to-business (B2B) electronic payments is the growing popularity of the "Purchase-to-Pay" model, which streamlines the accounts payable process from invoice receipt to payment advice.

Research Reveals Migration Trend
Recent research indicates that conversion to electronic payments continues to gain momentum in the United States. For instance, in December, the Federal Reserve announced that electronic payment transactions have for the first time exceeded check payments. In 2003, US e-payment transactions totaled 44.5 billion, compared to 36.7 billion checks. Just three years earlier, check transactions exceeded electronic ones by 41.9 billion to 30.6 billion.

Also, last fall the Association for Financial Professionals (AFP) reported the results of its 2004 Electronic Payments Survey, which indicated that organizations are more willing to migrate from checks to electronic payments for B2B transactions than they were four years ago.

AFP reports that more than 75% of B2B payments are made by paper check today. However, of its survey's 355 corporate respondents, 28% said their organization is "very likely" to move to electronics for the majority of their B2B payments in the next three years.

Purchase-to-Pay Adds to Momentum
The emergence of the "Purchase-to-Pay" invoicing and payment model is helping to build B2B electronic payment volume.

In the past, electronic invoicing in sophisticated markets such as the United States and Europe typically was accomplished via point-to-point Electronic Data Interchange (EDI) networks. These networks were painstakingly established and have helped both billers and payers communicate invoice and remittance advice information.

Because EDI links are costly to set up and maintain, efficient exchange of information from invoice to payment could only be achieved for a small fraction of trading partners.

With the advent of the Internet, the Purchase-to-Pay model allows even smaller to mid-sized suppliers to send invoices electronically and also track payments.

The Purchase-to-Pay model has gained favor in the last two years, as it benefits both the supplier and the buyer.

Win-Win Proposition
In the Purchase-to-Pay model, payers can consolidate invoice data from online invoice entry and secured file transfer channels. Depending on the biller's sophistication and size, it can consolidate the invoice information into a single file and easily download it, avoiding errors associated with manual entry. With this model, reconciliation and output to the A/P systems can be much faster.

Faster processing of invoices can lead to identifying discrepancies faster and further facilitate online dispute resolution with trading partners. More importantly, once the treasury has a total view on its total accounts payable, it can manage cash outflow more efficiently and even "cash in" on larger early-payment discounts.

Meanwhile, billers benefit from the Purchase-to-Pay model because it allows them to track the status of their invoices and more accurately predict their cash flow. The model also is a key reason why billers are more ready to accept electronic payments, as it allows them to extract more value from the process.

"The Purchase-to-Pay model is truly a win-win for both the biller and payer, and that ultimately will help fuel even faster adoption of B2B electronic payments," says Michael Sugirin, Vice President and Product Manager at Deutsche Bank.

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