The boom in electronic payables (ePayables) solutions, also known as electronic accounts payable (EAP), shows no signs of slowing. As organizations become more familiar with the opportunity, the buzz is less about “Should we do it?” and more about “Which type of EAP solution should we adopt?” I recently talked with end-user and industry veteran Larry Coffey, CPCP, who has experience with both primary types. He shared interesting insights that can help you avoid some bumps in the road.
Supplier-initiated Payments (SIP)
First, there are Virtual Cards, also known as supplier-initiated payments because they require the supplier to process a transaction. Larry relayed that, for suppliers, training on system usage—specifically, how to retrieve the Virtual Card number and process a transaction—tends to be lacking. This ultimately causes delays in getting payments into suppliers’ hands and creates more work for the buyer. Suppliers can get frustrated and they resist having to allocate resources toward the SIP process.
Buyer-initiated Payments (BIP)
The other primary type of solution is straight-through payments, also known as buyer-initiated payments, for which suppliers receive payments directly into their accounts without processing a card transaction. This can be great, but suppliers must notify the BIP provider if they change bank accounts; otherwise, payments are rejected. Larry notes that this happens more often than you might think. The problem grows when suppliers put the buyer on a credit hold because they are not receiving the payments.
- Discuss with your Virtual Card provider the training element for suppliers.
- Do not stop at selling suppliers on the benefits of Virtual Cards. Ensure the ones who agree to SIP are comfortable with the related technology.
Access the full input from Larry to obtain another SIP consideration.
Larry sees a bright future for EAP, but stresses that growth requires more education. Many suppliers still do not understand what these solutions are, especially when there are different versions/options. Further, when suppliers struggle with the fee for card acceptance, the buying organizations often cannot adequately respond.
Best Practice for Sustainability and Growth
To attract and retain supplier participation, your organization must initiate the payments more quickly than checks and ACH. Shorten the payment window to, say, 15 days or “upon invoice approval.” Larry has seen firsthand the positive impact shortening payment terms have had on an ePayables program.
See what else Larry thinks might influence the future by accessing his conclusions within the complete content.
Regardless of what your organization decides to do, even if it is foregoing an EAP solution altogether, make an informed decision. Talk with your current provider and, to gather more information about the options, talk with other providers and end-users, too. Hear about the lessons learned by your experienced peers, like Larry, to avoid the same pitfalls. Ask what surprised them the most, what the biggest challenges were, and what they would do differently. Also access additional resources on ePayables from Recharged Education.
About the Author
Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…