New to accounts payable? A few terms you should know

Are you new to accounts payable or the business payments sector? Getting started in this field can be exciting and rewarding. To help you transition smoothly and confidently, we’ve compiled a list of 13 important definitions you should know.

Acceptance

Payment acceptance refers to the percentage of payment attempts that are successfully processed. A payment acceptance rate is the percentage success rate, which is also referred to as a payment authorization rate.

ACH

ACH stands for Automated Clearing House and is described by the U.S. Treasury Department as “the primary system that agencies use for electronic funds transfer (EFT).” ACH allows businesses and consumers to pay bills automatically by providing an account number and bank routing number. 

Card issuer

A card issuer is an institution that issues cards and provides credit limits. Card issuers manage card features such as terms of use, benefits, and more. 

Chargeback

According to Forbes, a chargeback is “an action taken by a bank to reverse electronic payments.” Chargebacks can occur due to fraud, disputed purchases, or unauthorized transactions and result in funds being returned to the cardholder’s account.

DPO

DPO stands for days payable outstanding, and is a key KPI for any accounts payable team. This is the “average number of days it takes a company to pay back its accounts payable,” according to the Corporate Finance Institute. High and low DPOs can mean different things, so they shouldn’t be necessarily viewed as one being good and one being bad.

ERP

ERP stands for enterprise resource planning and typically refers to the software used to manage business processes, such as inventory, sales, marketing, finance, and human resources. ERPs often integrate accounts payable with other systems into a single system.

Merchant accounts

Merchants are any person or company who is selling products or services. A merchant account is an account established by the merchant to accept payment for these products or services. These payments can often be accepted in a variety of forms, such as credit cards, debit cards, cash, and wire transfers.

PCI DSS

PCI DSS stands for Payment Card Industry Data Security Standard, which is set by card networks to ensure the safety and security of a cardholder and suppliers’ sensitive information.

Watch the video below to learn more about PCI DSS. 

Processor

Payment processors are the companies or technology that facilitate the transfer of funds from a cardholder’s bank account to the merchant’s bank account.

Reconciliation

Reconciliation is the process of verifying financial transactions to align expected payments with actual ones. Two examples of how accounts payable teams do this are ensuring: 

• The balance in books/records equals the amount on bank statements.
• An accounts payable balance aligns with a balance schedule. 

Settlement

Settlement is the process with which processors facilitate the transfer of funds between the merchant’s bank and the cardholder’s bank to complete a transaction. 

Tokenization

Tokenization replaces original card data with a unique, generated placeholder, or “token.” It helps to reduce fraud because the tokens on their own have no value to someone trying to commit fraud. 

Watch the video below to learn more about tokenization.

Virtual cards

A virtual card is a single-use electronic card number that can be used at merchants instead of using a plastic card. They help to increase payment security, simplify supplier payments, and increase efficiency in accounts payable.

WEX accounts payable solutions

WEX offers comprehensive accounts payable solutions designed to simplify and enhance your payment processes. Here are some key features:

1. Automated payments

WEX provides automated payment solutions that reduce manual processing, minimize errors, and increase efficiency. By automating your payments, you can ensure timely and accurate payments to your suppliers and vendors.

2. Reconciliation

Reconciliation is an important aspect of accounts payable to ensure financial accuracy. WEX provides tools and services that help streamline the reconciliation process. These tools enable you to verify financial transactions, align expected payments with actual ones, and ensure that balances in your books match your bank statements.

3. Enhanced security

Security is key in financial transactions. WEX offers customizable spending controls that allow you to set limits and restrictions on transactions. These controls help ensure that your spending aligns with your budget and financial goals, providing better oversight and preventing unauthorized transactions.

4. Detailed reporting

With WEX, you get access to detailed reporting and analytics. This allows you to gain valuable insights into your payment processes, track performance, and make data-driven decisions to optimize your accounts payable operations.

5. Integration with ERP systems

WEX solutions seamlessly integrate with major ERP systems, ensuring a smooth and cohesive workflow. This integration helps in maintaining accurate records and improving overall efficiency.

6. WEX Virtual cards

WEX offers virtual card solutions that provide added security and convenience. Virtual card purchases are also more transparent. For example, with WEX, there are built-in APIs that allow for real-time notification so you’ll know immediately when purchases are made.

Virtual cards can be used for online transactions, reducing the need for physical cards and enhancing payment security. Work directly with WEX supplier enablement experts to help maximize virtual card acceptance and gain additional revenue.

Why choose WEX?

Choosing WEX for your accounts payable services means partnering with a provider that prioritizes innovation, security, and efficiency. WEX solutions are designed to help you navigate corporate payments, simplify your operations, and achieve greater financial control.

For more insights and updates on corporate payments, check out:

• Your guide to virtual card rebates
• Current trends in finance
• Boosting supplier enablement

Learn more about how WEX payment solutions can be tailored to your business, so you can accelerate and streamline operations while creating lasting growth and success for your organization.

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The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax and investment advisers.

WEX receives compensation from some of the merchants identified in its blog posts. By linking to these products, WEX is not endorsing these products or the content of the merchants’ websites. WEX also can’t ensure that merchants won’t change the content on the websites linked in this blog post.

Editorial note: This article was originally published on November 16, 2023, and has been updated for this publication.

Sources:
U.S. Treasury Department
CNBC
Forbes
Corporate Finance Institute
Investopedia
The Financial Controller