Understanding the Value of Green in Treasury
From reusable shopping bags to hybrid cars and energy-efficient light bulbs, there’s no doubt that ‘going green’ has attained mainstream status. This groundswell of support and action isn’t limited to personal behaviour. Over the course of the past few years, there has been an equally impressive uptake in corporate-driven programmes aimed at reducing the impact companies have on the environment.
When businesses consider going green, especially in treasury, it’s most often in the context of reducing paper payments and invoices. For larger corporations, the sheer volume of paper required to support traditional payments and invoice processes can be immense. Payment volumes can vary widely based on factors such as industry and/or established payment terms, but if one considers the additional supporting remittance detail that is typically attached to paper cheques, a single consolidated payment can often require four to six pages of paper. Multiplied over the course of a year, the amount of paper consumed for payments and invoice processing can be staggering.
Given the huge quantities of paper involved for even medium-sized businesses, it’s easy to see why people have focused so intently on efficiency, cost reduction and security when discussing the adoption of electronic payables and receivables. By significantly reducing the amount of paper in process, treasury departments can capitalise on a broad range of benefits. The benefits most often cited for electronic payments and invoices include:
But what about the environmental impact of adopting electronic payment and invoice management processes?
In these challenging economic times, building the business case for a technology initiative can be a challenge, which is why it’s important for treasury personnel not only to understand the traditional business benefits associated with electronic payments and invoicing but the environmental or ‘green’ savings as well. With a payments and invoice automation platform, it’s possible for companies to implement a green strategy that generates solid financial results and enables the organisation to operate in a more environmentally-conscious fashion.
According to a recent study conducted by Boston-based research advisory firm Aberdeen Group, organisations relying heavily on cheques are spending more than US$11 on average per payment. Contrast that statistic with best-in-class organisations that spend on average 38% less because of their broader use of electronic payment methods.
From a green perspective, there are a number of interactive calculators that summarise in black and white the potential green impact of moving from paper to electronic. Using the data provided by NACHA’s PayItGreen Alliance, a corporate treasury department initiating 120,000 paper payments per year could save the following annual resources by converting just 50% of those payments to electronic:
Although the example provided above pertains to payment initiatives, similar environmental savings can be generated through electronic invoicing initiatives as well.
In the past, electronic payment and invoicing initiatives focused primarily on the benefits of greater efficiencies and improved visibility into cash balances and transactions. More recently, the value proposition for migrating from paper to electronic has expanded into the arena of environmental sustainability. As treasurers move forward in a difficult economic climate, the environmental benefits associated with adopting electronic paper and invoicing processes should serve as another proof point in their effort to secure executive buy-in.