Myths can be fun.
Like the myth that giant alligators live in the sewers of New York City.
But myths aren’t fun when they hold businesses back from making necessary changes.
Like paying suppliers electronically instead of with paper checks.
Here are five myths regarding electronic payments that your organization should ignore:
Myth #1: Suppliers won’t accept electronic payments
The truth is that electronic payments are a powerful tool for attracting and retaining valued suppliers. More than 80 percent of businesses want to increase the percentage of electronic payments that they receive from customers, per the Remittance Coalition.
For starters, it costs suppliers considerably less to process an electronic payment than a paper check. And suppliers are automatically notified of pending payments and the transaction details. With the visibility provided by electronic payments, suppliers no longer need to call or e-mail you regarding payment status to manage their cash flow.
Finally, the rich remittance detail provided by leading electronic payment solutions makes it easy for suppliers to manage their receivables. Suppliers also can access their payment history online 24/7.
Myth #2: Electronic payments are risky
Many senior executives get a false sense of control by holding a paper check in their hand. The reality is that paper checks are easily intercepted during delivery, or fraudulently printed in the first place. In fact, checks are responsible for more than 10 times as much fraud losses as Automated Clearing House (ACH) payments and card transactions, the Association for Finance Professionals (AFP) reports.
Electronic payments eliminate this vulnerability by providing greater visibility and control across the payment lifecycle. Automatic checking of payee information against vendor master data and Office of Foreign Assets Control (OFAC) helps identify suspicious transactions. Transactions can be automatically flagged for review based on pre-set criteria such as the transaction amount or whether the supplier is new or uses a Post Office Box. And payments ready to be initiated can reviewed ad hoc.
What’s more, card transactions must comply with the Payment Card Industry Data Security Standard (PCI DSS), stringent requirements for safeguarding sensitive data, improving control over the posting process, and enabling detailed oversight and reporting. And leading electronic payments solutions track the amount and payment method of all transactions.
Myth #3: Paying suppliers electronically is costly.
Paper checks are costing you more than you think. Whether it’s paper, printer ink, postage, labor, the upkeep of printers and mail stuffing equipment, bank fees or the expense of replacing lost checks, the hidden costs of paper checks are staggering. As a result, paying suppliers with checks costs 30 times as much as paying suppliers electronically, per the National Automated Clearing House Association (NACHA).
Leading electronic payment solutions eliminate your costs to pay suppliers from Day 1. The electronic solutions provider takes on the burden of managing and initiating all your supplier payments and supporting your suppliers. What’s more, the time and resources your accounts payable department saves by paying suppliers electronically can be used for value-added tasks such as data analysis and vendor master database cleanup. And the monthly cash-back rebates or rewards earned from virtual card payments to suppliers, offsets department overhead and fund automation projects.
Myth #4: Migrating to electronic payments will be a burden on your staff.
Supplier adoption is critical to the success of an electronic payment initiative. But the burden of onboarding and supporting suppliers doesn’t have to be placed on your shoulders. Leading electronic payment solutions providers offer comprehensive supplier services for electronic payments success. These services start with an extensive spend analysis report detailing which of your suppliers accept electronic payments, and the spend they represent.
Electronic payment solutions providers then taken on the task of contacting and enrolling suppliers, including the handling of all paperwork, supplier registration and administrative work. And electronic payment solutions providers also offer a payment help desk to manage updates, changes, questions about payment status, and new suppliers.
Myth #5: There’s nothing in it for senior management.
There is no question that an electronic payment initiative will require senior management’s blessing. Paying suppliers electronically helps senior management achieve some of their biggest objectives. For starters, leveraging certain card programs for electronic payments enables buyers to instantly extend their Days Payable Outstanding (DPO), a measure of the time it takes a business to pay its suppliers, without changing their payment terms. This is possible because the payback period to the card issuing bank kicks in once payment is initiated.
Extending DPO helps senior management free up cash for investments in the business. What’s more, organizations can earn cash-back rebates on payments made to suppliers via card. It is not uncommon for businesses to earn cash-back rebates on 30 percent of their spending.
In some cases, cash-back rebates have single-handedly transformed accounts payable into a profit center. And electronic payment solutions make it easier for buyers to pay invoices within early-payment discount windows, enabling the business to earn discounts on the amount-due on an invoice (on average, businesses capture a 2 percent discount for early payment).
Don’t let these myths be the reason your organization continues paying suppliers with checks.
Contact us at 800-217-2266 to arrange a no-obligation consultation on how your organization can move forward.