An urban legend. A myth. Wishful thinking. Fake news. Whatever you call it, the notion that suppliers won’t accept electronic payments from their customers couldn’t be further from the truth.
In fact, the percentage of payments that U.S. businesses make to their suppliers via paper check are expected to decline from 39 percent to 18 percent over the next three years, per the Institute of Finance and Management’s (IOFM) 2018 Future of Accounts Payable Study. Conversely, the percentage of payments made via Automated Clearing House (ACH) transactions is anticipated to grow to 38 percent of supplier payments (from 30 percent), while the percentage of payments made via virtual card will more than double (from 6 percent of all supplier payments to 16 percent).
The anticipated growth of electronic payments is welcome news to suppliers.
And, it is further proof that providers of automated invoice processing solutions need to partner with a provider of integrated payables solutions. Such a partnerships ensures customers can reap the unique benefits of automating the accounts payable cycle from invoice receipt through to payment settlement.
What Suppliers Like About Electronic Payments
Like the outdated theory that self-driving cars would never become a reality, it is time to retire the idea that suppliers won’t accept electronic payments.
There are three reasons that suppliers want to be paid electronically:
1. Faster payments:
Suppliers require cash for the purchase or goods or raw materials, the manufacturing and distribution of finished products, sales and marketing activities, and salaries and administration. What’s more, fast-growing businesses depend on cash to fund innovation, launch new products, enter new geographic markets, expand production and acquire businesses. None of this is possible if businesses can’t get their hands on their hard-earned cash. That’s why more suppliers want to get paid electronically.
Virtual card payments and ACH transactions arrive days (or weeks) faster than paper checks; in some cases, electronic payments are deposited directly into a supplier’s bank account the day after an invoice is approved. And, unlike waiting for the unpredictable mail float, suppliers can rest easy knowing exactly when an electronic payment will arrive in their bank account.
Sixty-three percent of businesses say that decreasing Day’s Sales Outstanding (DSO) – a measure of how long it takes collect receivables – is “important,” “very important,” or “imperative,” per IOFM. Combining an electronic payments solution with an automated invoice processing solution helps do that: invoices are approved faster, and payments are initiated and delivered faster.
2. Streamlined receivables processing:
Matching remittance data and customer payments and applying cash is a headache for most suppliers. Suppliers must manually key the remittance information that arrives on paper or pay a bank lockbox provider big money every month to capture the information on their behalf. Making matters worse, remittance data is frequently incomplete, inaccurate or missing, resulting in unapplied cash that gums up a supplier’s working capital.
Payment methods such as virtual card payments and ACH transactions ease this burden by electronically providing suppliers with the remittance detail they need to effortlessly match and post their receivables. In many cases, electronic remittance detail can be extracted and matched without any human operator intervention. Matching and posting paper checks and remittances and will never be as efficient as their electronic alternatives, regardless of whether the payer uses an automated invoice processing solution.
3. Payment flexibility:
There are few instances in business where one-size-fits-all. The same holds true for the way suppliers preferred to be paid. Eighty-seven percent of organizations receive paper checks from customers, Receivable Savvy finds. But most suppliers also receive payments via ACH and virtual card.
While 59 percent of organizations prefer to be paid by ACH, 50 percent of suppliers will accept payment via a virtual card to get paid faster, Receivable Savvy finds. The message is clear: suppliers prefer to do business with customers that can pay them in the method that makes the most sense, based on their current business needs. Automated invoice processing solutions don’t provide this flexibility on their own.
Faster payments. Streamlined receivables processing. Payment flexibility. These are the things that matter to suppliers. Businesses that can help their suppliers achieve these benefits will have an easier time attracting and retaining valued suppliers. Providers of automated invoice processing solutions can help their users make this vision a reality by partnering with providers of fully integrated payments solutions to automate accounts payable end-to-end, from invoice receipt to payment settlement.
If you are an automated invoice processing solutions provider looking to partner with a provider of integrated payment solutions, WEX wants to speak with you. Get in touch to learn how we can help.