Getting EAP in the door.

When you think of electronic accounts payable (EAP) solutions like Virtual Cards and buyer initiated payments, what is the first end-user benefit that comes to mind? Chances are, it is the potential to earn revenue share/rebate. We have all seen or heard phrases like “turn AP into a profit center.” There is no denying the monetary appeal, but in this fraud-gone-wild era, I think the fraud protection benefit deserves more press. Whether you are an EAP provider or end-user trying to convince management to implement an EAP solution, be sure to stress the following five points in your business case.

The Protective Side of EAP Solutions

  1. Suppliers cannot overcharge you, charge too soon, or process duplicate charges that require your time and energy to resolve. Because payments to suppliers are based on the amount your organization approves, transaction disputes are rare (or dare I say non-existent?). 
  2. Checks reflect your organization’s bank account number; sensitive information is “out there.” EAP payments do not have this risk.
  3. Fraudsters cannot create a usable counterfeit card from a Virtual Card nor can they steal Virtual Card information to make fraudulent purchases.
  4. No need to pursue external controls like Positive Pay, which often come with a cost. (See definition at the end of the post.) EAP solutions are already secure.
  5. Unlike ACH payments to suppliers, EAP solutions eliminate the need for suppliers to provide their bank account information. Your organization does not have to store and secure this type of supplier data, which is a win for both of you.

Conclusion

EAP payments are not the best fit for every situation (e.g., one-time purchases/suppliers for which traditional Purchasing Cards are ideal). However, they are a good option to add to the mix. Ultimately, every organization needs to develop a payment strategy that best serves its needs; namely, one that minimizes costs and fraud risk.

Access more information about EAP solutions.

To get ePayables/EAP into your organization, ensure your business case stresses the protective benefits.

To get ePayables/EAP into your organization, ensure your business case stresses the protective benefits.


Positive Pay Defined

Positive Pay is a service offered by most banks. As part of the service, companies transmit to their banks their check issuance file each time checks are written. The file contains a list of check numbers and dollar amounts. When a check is presented for payment, it is matched against the file. If there is a match, the check is honored and the check number removed from the file. If there is no match, the check is handled according to the preset instructions from the company.

Payee Name Positive Pay is an enhanced product that includes the payee’s name along with the check number and dollar amount in the file sent to the bank.

Source: 101 Best Practices for Accounts Payable

Why one bank opted out of Virtual Cards.

Like end-users, providers have faced the question of which type of electronic accounts payable (EAP) solution to adopt and make part of their commercial payment offerings. Some providers focus on Virtual Cards, also known as supplier-initiated payments (SIP), which come in various forms. Others have gone the route of buyer-initiated payments (BIP). There are also providers who make both types available to clients. One bank who is forging a clear EAP path with a particular type shares the rationale for their decision.  

Union Bank’s View

Fancy checks. This is one way Diane M. Kush, Sr. Product Manager, MUFG Union Bank N.A. (“Union Bank”), describes supplier-initiated payments. She shares supplier challenges with SIP:

  • Payments made to suppliers one email at a time
  • Email requests coming from multiple buyers/customers
  • Supplier labor costs associated with handling these emails
  • Missed emails = missed payments, resulting in reconciliation issues for both buyer and supplier

After considering the options, Union Bank decided to offer their commercial clients a BIP solution. Supplier benefits include lower card acceptance costs and lower labor costs. Payments are automatically and electronically deposited into the supplier’s account. Consider Diane’s example of a buying organization who approves three invoices from one supplier, totaling $50,000:

  • With SIP, the supplier proceeds in trying to process separate transactions, one for each invoice, and gets declined. Then the supplier must contact the buyer to determine what’s going on.
  • With BIP, the buyer’s approved $50,000 is directly deposited for the supplier. In this way, BIP shares attributes with ACH payments. Plus, the supplier has access to a portal that provides invoice payment detail, if desired.

To learn more about Union Bank’s solution, contact William Kniering at William.Kniering@UnionBank.com.

Related Blog Posts

For Union Bank, the key to their electronic accounts payable future is buyer-initiated payments. For others, it might be a different option.

For Union Bank, the key to their electronic accounts payable future is buyer-initiated payments. For others, it might be a different option.

What Do Suppliers Think?

Are suppliers more receptive to SIP or BIP? I have heard mixed opinions on this. One provider who offers both relayed to me that suppliers lean toward SIP for different reasons; for example, the design of their receivables process, which they might be unwilling or unable to change. Others have told me that, with appropriate education, suppliers see the value of BIP. I agree with the power of education, no matter what payment option you are trying to sell to suppliers, and buyers must ensure suppliers receive benefits, too.

Final Thoughts

There are many successful EAP programs out there, both BIP and SIP. As with any business decision, one size does not fit all. Each party needs to evaluate what will work best for their goals and business. Because my mission centers on education, I would be happy to publish additional views on EAP options, so feel free to contact me. Blog comments below are welcome as well.


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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Electronic payables insight to save you time.

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.

SIP Tips

  • 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.

What will your organization decide regarding electronic payables? Will it be Virtual Cards, straight-through payments or none at all?

What will your organization decide regarding electronic payables? Will it be Virtual Cards, straight-through payments or none at all?

The Future

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.

Final Thoughts

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

Subscribe to the Blog