You may be familiar with the phrase, “You only get one chance to make a first impression.” Similarly, you only get one chance to properly enable your suppliers to receive electronic payments, and here's why.
There are three primary ways for a business to pay its suppliers—check, ACH, and credit card. And it makes a big difference to your bottom line which method you use.
Checks are time-consuming, expensive, and inefficient. ACH is much better than checks because it is quicker, cheaper, and electronic.
Despite ACH being a good option, the best way to pay your suppliers is by credit card. In addition to being simple and secure (especially single-use virtual cards), an AP department makes money (rebates) on each card transaction. For our customers, the card rebates generated outweigh the cost of our solution by a significant margin—hundreds of thousands of dollars for many customers.
We speak with a lot of businesses about their AP processes and find that most fall into two categories. The first are those who are still primarily using checks to pay suppliers. According to a recent survey done by Credit Research Foundation (CRF) in partnership with NACHA, 50 percent of organizations’ B2B payments are still made by check. This is far too many given the more economical payment options on the table for businesses.
In the second category are those who have transitioned most of their suppliers to ACH. You might expect that the second group is in a better position than the first. And if you are only looking at the short term, you would be correct. But in the long run, these businesses have put themselves in a bad position.
The best time to ask a supplier to accept credit card is when they are currently receiving paper checks. After all, checks are just as time-consuming, expensive, and inefficient for AR departments as they are for AP departments. Therefore, buyers and suppliers mutually benefit from replacing paper checks.
What we have found in practice is that once suppliers accept ACH, it is more difficult to convert them to accept a card payment. So with the best of intentions, many AP departments have sacrificed a significant revenue stream by converting most of their suppliers to ACH without trying to enable them for credit card first. And often they are guided down this wrong path by well-intentioned technology providers who allow suppliers to sign up for ACH in a supplier portal.
A much better strategy is to identify those suppliers who are likely to accept card payments and try to enable them for card. If they are unwilling to take card, only then should they be enabled for ACH. This may sound like a major effort, but it is well worth it in the long run.
And keep in mind, there are payment solution providers that will do all of the heavy lifting for you. You simply send them a supplier list, and they enable your suppliers for electronic payment continuously. The enablement process never ends, ensuring you get the most rebate value from card payments. And instead of answering questions about late or missed payments, your AP team can focus on adding strategic value to your business.
If time for vendor outreach is limited like it is for most AP departments, consider payment automation. Don’t miss this opportunity to enable your suppliers for electronic payment in a way that promises success.