The 3 “Must-Haves” for Electronic AP Adoption

Most payments industry professionals have gotten the message that establishing a digital procure-to-pay ecosystem is the way to the future. While not a panacea, a B2B e-payables strategy gets a company closer to meeting the needs and preferences of tomorrow’s customers—and indeed, many of today’s. Yet for as many AP leaders are sincerely interested in pursuing digital solutions, they’re overwhelmed with questions and up against roadblocks that keep them from “pressing go” on the technology they believe will take their businesses to the next level.

To be clear, while there are technologies available to help businesses process paper currency and checks, this discussion focuses on the purely electronic: non-cash payments (i.e. ePayables), notably ACH or card transactions, including virtual card numbers (VCNs). Let’s look at the three primary requirements for making a success of these electronic AP solutions.

1. Knowledge and Education

Technology decision-makers are swimming in data convincing them of their operations’ digital potential, but that’s because information is compelling—it often provides the starting-point for exploring options and embracing change. In their 2015 Electronic Accounts Payable Benchmark Survey Results, RPMG Research Corporation shares results of their electronic accounts payable (EAP) end-users study. Defining EAP as “non-plastic purchasing card accounts used to pay for goods and services after an invoice has been received for those goods or services,” they found nothing, if not potential, for:

• Organizational spending on EAP:
  • Monthly EAP spending per organization is $2.5 million, up from $1.1 million in 2012
  • EAP spending is expected to rise to $110 billion by 2019
  • EAP spending represents 58% of total purchasing card spending, up from 49% in 2012
• Cost-Savings using EAP:
  • A $22 per-transaction cost savings, based on estimated cost of $31 for traditional check payment vs. an average cost of $9 for EAP invoice payment
  • An average of 51 days of working capital float and an additional working capital of $4.3 million (assuming average monthly EAP spending of $2.5 million), yielding about $216,755 of additional yearly cost savings.

Aside from boosting operational efficiencies and cash flow, electronic forms of payment also result in reduced fraud, cleaner/better data, and a more productive AP team who benefit from more automatic and streamlined workflows. Building a business case to adopt AP technologies involves understanding and “selling” the data, and applying the benefits/value proposition to your organization’s specific needs. It’s important to understand your AP department’s pain points and what they hope to achieve with a solution—and after assessing alternatives, you can count on technology vendors to provide everything the C-suite needs to become comfortable ROI projections and next steps. Then, you can focus on convincing your suppliers to adopt the technology.

Explore the value of ePayments in You Have the Technology, Rid Your Organization of Paper Checks and Five Strategies to Uncover Value in Procure-to-Pay through E-Payments.

2. Supplier Acceptance

One of the most significant barriers to the adoption of electronic AP technology is supplier acceptance—or lack thereof. The RPMG survey focused extensively on this point, revealing that while 91% of EAP end-users had engaged in an effort to enlist suppliers to accept EAP payment, they paid only 17% of their supplier base with EAP In 2015. To no surprise, only 24% of respondents are satisfied or very satisfied with the current level of supplier acceptance. What’s more, organizations that have a higher percentage of their supplier base accepting payment by EAP report (a) significantly higher EAP payments, (b) a wider array of goods and services paid for with EAP, and (c) a significantly higher percentage of transactions (of all dollar values) paid with EAP.

Read 5 Reasons Your Suppliers Love To Receive Virtual Payments for more on making vendors happy with innovative payment options.

Indeed, the pedal is to the metal to convince suppliers on board, and strategic approach is often required—and highly recommended—to improve supplier relationships and enhance them with technology. This is the topic of the recent TSYS white paper, Shifting Perspective: Three Best Practices for Growing Your ePayables Program by Increasing Supplier Acceptance, which recommends companies secure full corporate engagement, provide suppliers with education on ePayables benefits, and keep the outreach campaign simple. In fact, customer engagement is a focal point in the B2C marketplace and there are opportunities for improvements on the B2B side. For more on meeting vendors’ needs, see Supplier Relationships Believed Central to B2B Customer Engagement.

3. A Debunking of the Myths

Tying into the knowledge and education efforts is the need to address the common misconceptions about electronic payment processes. You’ve probably heard these within your own organizations and from technologically reluctant suppliers: “Digital payments aren’t as secure,” or “we don’t have the right technology in place to support new processes, “ or “it’s just too expensive.” Really, these are perceived issues with e-payments, and all can be tackled with, yes, education and outreach to technology vendors who help organizations implement game-changing solutions. More insights into debunking myths can be found in Four Barriers to E-Payments Adoption (and How Virtual Cards Overcome) and Promoting Virtual Cards Among Your Suppliers.

The biggest myth of all might be the belief that progress isn’t necessary—that adopting digital process doesn’t need to be a priority. It’s a fact that the technology is here and change is already happening. This message is loud and clear, and payments leaders have the opportunity to explore the possibilities, or get lost in the shuffle of manual AP processing.

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