Unlike private companies, government agencies don’t have the luxury or flexibility of withdrawing against a line of credit or taking out a conventional business loan. When they need cash, they are generally at the mercy of a fixed budget. But there are ways to save cash in order to maximize cash flow, even when financial resources are tight. One of the easiest is to take advantage of electronic payments, which offer unique cash flow generating features.
Electronic Payments Save Money
VISA commissioned a study, “Cashless Cities: Realizing the Benefits of Digital Payments,” that revealed how cash is oftentimes more expensive that an electronic payment. Researchers found that checks cost organizations more than seven cents per dollar to process, versus five cents per dollar for electronic payments. Consumers also prefer electronic payments for their convenience, since they can pay using mobile devices.
No-Fee Credit Card Transactions
Government agencies using a digital payment platform can also avoid paying expensive credit card merchant fees. Instead of that cash flowing to major credit card companies like MasterCard and VISA, the fees can be eliminated through automated surcharging. The process is more transparent, uses flex-rate pricing that doesn’t involve service fees that penalize payers who prefer to use a debit card, and the credit card fees are reduced to zero.
An electronic payment system accelerates the entire revenue cycle. The money can start earning interest in a government account sooner, when it would otherwise still be in transit or pursued for collection. The invoices are digitized, and arrive instantly. That eliminates long delays as well as the cost of printing and mailing. Invoices, payments, and reimbursements can be tracked electronically, reducing errors, and payments can be made and received 24/7, even on legal holidays. If payers are short on cash, they can use the automated repayment plans featured on the most advanced electronic payment systems, to proactively manage their bills. That enhances customer service as it facilitates timely payment to government agencies.
Less Administrative Work
Because electronic payment systems are fully automated, the cost of office overhead can be substantially reduced, freeing up cash. There is no need to manually create, send, archive, or store invoices and payment receipts. That’s why the United States Office of Management, known for its cost-saving expertise, recommends that its own departments transition away from paper invoicing systems to electronic ones. Payment records can be securely safeguarded in the cloud, and from there administrators can automatically generate and share financial reports. That saves time for auditors and accountants, to further lower the cost of office staff and preserve government revenues.
Fraud and Theft Prevention
Electronic payment systems can help prevent fraud, embezzlement and theft, and that security protects the bottom line for federal, state, or local government agencies. Fraud costs more than just the amount of dollars that are stolen, because of the additional expense of investigating such crimes. It also undermines public faith and trust in government. But studies indicate that switching to an electronic payment system can reduce overall financial crime by as much as 10 percent.
So electronic payments can enhance government cash flow for a variety of compelling reasons. Best of all, converting to electronic processing is an easy turnkey transition requiring no extra investment in IT staff or infrastructure.