How Suppliers Get Paid via an ePayables Process
With an ePayables solution, the end-user organization receives and approves a supplier’s invoice through its established processes. It mirrors a traditional purchase-to-pay process, making it different than a streamlined P-Card process in which the card number is typically provided in conjunction with order placement and the supplier charges the card upon order fulfillment.
Following invoice approval, the end-user initiates payment to the supplier through its card issuer/provider, usually by providing an electronic “payment instruction file” or similar. The approved amount might represent one invoice or multiple invoices from the supplier. Then, depending on the specific solution, the supplier either:
- processes a charge transaction for the approved amount to a designated Virtual Card account number or
- receives payment directly through its merchant account
Because payments to suppliers are based on the amount approved by the end-user (there are systemic controls for this), transaction disputes, chargebacks and fraud are rare.
1. Pull Payments: Transactions via Virtual Cards
These payments are sometimes referred to as supplier-initiated payments (SIP). There are a couple versions:
- Supplier retains an account number on file for the end-user (e.g., Dynamic Ghost Account, Lodged Card) or
- Supplier receives a different one-time use (single-use) account number for each order/invoice
Unlike a traditional P-Card with a monthly limit, a Virtual Card has no available limit until the end-user initiates payment for the approved amount. See how ePayables and Virtual Cards compare to P-Cards...
The designated Virtual Card account number will only work properly if the supplier charges the amount approved by the end-user. However, with some Virtual Card solutions, a supplier can divide the approved amount into multiple charges, but cannot over-pay. There is usually an expiration date as well. If the supplier does not process the charge transaction in time, the end-user has to get involved again.
2. Push Payments: Supplier Paid Directly
These types of solutions, which do not require the supplier to process a charge transaction, are known as buyer initiated payments (BIP), straight through payments (STP) and push payments. The payment is pushed to the supplier, similar to an ACH payment, but it travels through the “card rails” (through the supplier’s merchant account to its bank account).
Keys to Success
First, thoughtfully identify suppliers and purchases best-suited for an ePayables process. For suppliers to receive optimal benefit (and help offset the cost of acceptance), ensure you initiate payments in less than 30 days (e.g, within 10 days of invoice receipt). See also insights from an end-user.