AP Holds a Winning Card Hand

Will 2019 finally be the year in which the key stakeholders within your organization happily, or at least willingly, support Commercial Cards? For some, accounts payable (AP) is the biggest holdout, but, as we all know, their stance on card solutions can make or break a program. This is especially true for organizations wanting to implement or expand an electronic accounts payable (EAP) option like Virtual Cards, which AP typically manages. A common tactic by a stubborn AP manager is to say the ERP system cannot accommodate such payments. Then no one questions them because AP is viewed as the expert in this arena. To reopen the discussion and start making progress, following are insights from an AP veteran and a four-step approach to try in an effort to get through to AP.

AP’s Attitude Affects Everyone

Sometimes even senior management backs down from AP, but this can be the worst outcome for everyone. Accounts payable expert Mary Schaeffer, AP Now, shares, “When I hear someone say that they are going to wait until so-and-so retires before moving forward with a new project it saddens me. Usually it is because the person in question is either difficult to deal with or completely resistant to change. This is not a good situation either for them or for their organization. The reasons it’s not good for the organization are obvious. It gets left behind, less competitive, and doesn’t progress as much as its competitors.”

Mary continues, “The employee in question is also putting themselves in jeopardy. The business world, including the accounting and accounts payable space, is evolving rapidly. The contrary employee is serving as a roadblock to progress, usually coasting for a few years until they can retire. Plain and simple, they may not get those few years. Management may decide their position is no longer needed and they will definitely be at the top of the list for any headcount reduction initiatives. Personally, they’ve missed a great opportunity to try something new and enjoy their last few years of working.”

Organizations may also be experiencing a conflict between AP and the procurement department regarding card payments. In response to an AP Now industry survey, Internal Controls in AP, one AP manager for a large company commented, “P-cards pose problems with duplicate payments. Coming from an AP standpoint, they are disliked, however our Supply Chain seems to love them…” As disheartened as I was to read this (I’m the lead researcher for the survey project in progress), it represents an opportunity.

Getting Through to AP

  1. Recognize AP as an important part of the card program and initiate a respectful—versus confrontational—discussion. To prevent AP from feeling ganged up on, consider a one-on-one meeting to open the door to better communication.

  2. Recap the benefits of Commercial Cards and the organization’s related goals. Encourage questions to ensure AP has an understanding. Sometimes resistance to cards is rooted in a lack of knowledge.

  3. Find common ground; for example, supporting internal goals, making AP’s job easier, etc.

  4. Ask AP about their concerns and challenges. Step through the related processes together to identify the facts. Invite them to brainstorm with you on possible solutions. Everyone wants to feel valued and heard.

Examples

  • If they cite duplicate payments as a problem, determine the extent of the issue, the control gaps that allow it to happen, and how to resolve it.

  • If their challenge pertains to reconciliation, maybe they are making the process harder than it has to be. Inquire about the pain points and share ideas for process improvement that would still retain satisfactory controls.

  • If they view the ERP/accounting system as a roadblock to Virtual Cards, involve the system vendor. There might be functionality that AP is not aware of.

As with most problems, productively working together can lead to positive results. AP’s support of the card program can be a game changer—for them and the organization.

Related Resource

Will your organization win or lose? AP often controls the stakes in the high risk/reward world of B2B payment strategies.

Will your organization win or lose? AP often controls the stakes in the high risk/reward world of B2B payment strategies.



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

Virtual Card reconciliation hurdles

Paid in full? In a perfect world, suppliers would process Virtual Card transactions within a day or two of receiving the payment notification, thus simplifying your accounts payable operations. In reality, some Virtual Card payment processes get stuck midway; that is, the supplier is slow to act or, worse, does not act at all. Sometimes this aspect is why AP may be lukewarm to Virtual Cards. Given the potential snags, how should your organization treat Virtual Card payments from an accounting perspective? While every organization is unique and may take different approaches, following are suggestions plus tips for easing potential frustrations.

For an overview of Virtual Cards (pull payments) versus buyer-initiated payments (push payments), click here.  

Accounting Entries

Again, every organization might be a little different, but the following types of entries could occur:

  1. Upon receipt of goods (e.g., debit an asset account and credit accounts payable)
  2. Following invoice processing, when AP initiates the related Virtual Card payment through its electronic accounts payable (EAP) provider (e.g., debit accounts payable and credit a designated Virtual or Commercial Card payable account to keep these payments separate from other payment types)
  3. When AP pays the EAP provider (e.g., debit the designated payable account and credit cash)

Reconciliation

Chances are, the statement total from the EAP provider does not exactly match the amount in the associated payable account because you are still waiting for one or more suppliers to process Virtual Card transactions. The key is to streamline your reconciliation process. Pay the EAP provider and then focus on the remaining amount in the payable account.

  • Which pending Virtual Card transaction(s) does the remaining amount represent?
  • Which pending transactions are associated with Virtual Cards that have expired while waiting for the supplier to act?
  • What does your EAP provider offer in terms of reporting to help you easily identify pending transactions (Virtual Card payments you have initiated but suppliers have not acted on), including any expired cards?
  • If needed, does your ERP system offer any reporting to simplify the reconciliation?

 

To maximize Virtual Card payments, plan ahead for how to prevent and address potential hurdles.

To maximize Virtual Card payments, plan ahead for how to prevent and address potential hurdles.

Additional Virtual Card Tips

As you add suppliers to your Virtual Card program, include relevant training.

  • Work with suppliers to identify who within their organizations will need training. 
  • Train the applicable supplier personnel on the Virtual Card process. See a related blog post on Virtual Card acceptance.
  • Provide documented instructions for their ongoing reference.

Within your organization:

  • Determine your Virtual Card expiration date strategy.
  • Decide if you want to send reminders to suppliers before a Virtual Card expires.
  • Document procedures for how AP should address Virtual Card payments that suppliers do not process in timely manner. Besides training and communications with suppliers, this might involve extending the card expiration date if possible or reissuing a Virtual Card. While you do not want to wade into the waters of unclaimed property, try to avoid defaulting back to a check payment for the offending supplier, which can derail your Virtual Card program.

Access more content on ePayables/Virtual Cards.


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

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12 program support responsibilities.

The trifecta of Commercial Card program management is the program manager/administrator (PM/PA), procurement, and accounts payable (AP). However, the latter two might get overlooked when program roles are developed. Does your organization assign specific card-related responsibilities to procurement and AP? They can fulfill an important support function, regardless of which department the PM/PA resides in. Even though department roles vary from one organization to the next, you still can ensure the following 12 tasks are assigned to an appropriate party. Your card program will benefit from everyone working together.

Procurement

Program success is dependent on supplier acceptance of Commercial Cards. Procurement (or a related department) should:

  • Address card acceptance in competitive bids/RFPs 
  • Specify card-related terms in supplier contracts; for example, prohibit surcharges for card acceptance and mandate compliance with the Payment Card Industry Data Security Standard (PCI DSS)
  • Notify AP about card-accepting suppliers

AP

AP is in a gatekeeper position to uphold policies and/or contracts concerning payment method. They should:

  • Remove card-accepting suppliers from the master vendor file (unless there is a good reason, along with accompanying controls, to pay a particular supplier more than one way)
  • Not set up new suppliers in the master vendor file until they verify the intended payment method
  • Refuse to process check requests for suppliers that accept cards
  • Reduce the frequency of check runs to encourage supplier acceptance of electronic payments

Both Departments

Tasks for both procurement and AP include the following.

  • Contribute to the establishment of, or updates to, an internal “payments policy”
  • Train their staff on their card-related roles and responsibilities
  • Monitor suppliers/payments to ensure card payments occur as expected
  • Look for additional opportunities to use cards—plastic or virtual—based on payment history
  • Track the impact of card payments (e.g., process savings, PO reduction, etc.), which helps fuel program metrics

How many of the 12 things noted herein does your organization consistently do? How can you strengthen program support roles? See also a related blog post on how management needs to address two aspects of the staff members (like procurement and AP) responsible for executing the organization’s payment plan.


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

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