The traditional AP process of cutting paper checks for vendors is full of challenges: it’s inefficient, time-consuming for staff, exposes your company to check fraud and above all it’s incredibly expensive. According to a 2015 AFP Payment Survey, the average cost of sending a paper check is $5.96 – if you’re sending out 200 checks each month, you’re spending an average of $14,304 each year just to print and mail those checks. When you add in the expense of staff time needed to get the checks in the mail, your expenses will go even higher.
It’s no wonder that switching to electronic forms of payment is a strategy with multiple benefits for any size organization. In this series we will discuss the key elements of e-Payments, the inefficiencies, challenges and the electronic migration process. First we will look at payment methods.
When making the switch to ePayments, there are several different payment types available to your vendors:
- ACH – (Automated Clearing House) is an electronic network for financial transactions in the US that processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit, payroll and vendor payments.
- Virtual Card – A virtual credit card is a unique 16-digit computer generated number used to settle a specific vendor payment transaction issued for a specific dollar amount. Designed as a more secure alternative to ACH and check payments, virtual cards are essentially “card-less” credit card payments. Virtual cards can be processed by anyone who accepts traditional credit card payments, which typically includes the vast majority of your vendor community.
- EDI – (Electronic Data Interchange) is an electronic communication method that provides standards for exchanging data via any electronic means. By adhering to the same standard, two different companies or organizations, even in two different countries, can electronically exchange documents (such as purchase orders, invoices, shipping notices, and many others).
- Foreign e-Payments – are the electronic exchange of one currency for another at an agreed exchange price on the over-the-counter (OTC) market. Most often accomplished via ACH, EFT (electronic funds transfer) or wire service, and with transactions having a determined currency cut-off time. A cut-off time is the latest time that an international payment can be processed with a value date of today, driven by the time zone differences of the exchanging countries. The processed value date usually adheres to the time zone cut–off of the country of payment destination.
Replacing checks with e-Payments is a serious goal for more businesses in 2017, and one that ACOM helps more clients achieve for up to 100% paperless processing for all of their vendor payables. Call us at (800) 699-5758 or email us find out how.