Portions of the following content were featured within the November 3, 2014, blog post, Recast your ballot: Does BIP or SIP win your vote? In addition, learn why one bank opted out of Virtual Cards and obtain an end-user’s insight on the two primary types of ePayables.
ePayables: BIP vs. SIP
Recharged Education’s Lynn Larson asked Bora Payment Systems LLC (“Bora”) about their views of the two primary types of ePayables solutions: buyer-initiated payments (BIP) and supplier-initiated payments (SIP). The following content reflects their opinions. Bora is a business-to-business BIP solution provider, as described at the end of this page.
According to Bora, the “best” AP system is one that matches the needs of the buying organization (end-user). When it comes to making AP payments, most end-users are interested in security, scalability and swift reconciliation. Because these payments are commonly linked to a pre-existing contractual arrangement between the parties (end-user and supplier), the system must deliver on that promise. That said, there are certain payer and payee attributes that lend themselves to a supplier-initiated payment (SIP) system. For example:
End-User (Payer) Profile for SIP
- Less than $5 million in annual AP card spend
- Many non-recurring payments to suppliers
- Web-based and T&E purchases
Supplier (Payee) Profile for SIP
- Often paid infrequently
- Interchange is not key determinate of P-Card acceptance
- Does not receive aggregated or high volume payments
When these two profiles exist, the “better” AP system for the end-user will be SIP. Conversely, different profiles make a buyer-initiated payment (BIP) solution a better solution for the end-user. Project scale alone can render any SIP solution unwieldy, all else held equal, since reconciliation capability decays rapidly in the face of an email based delivery system. As a generic guide, attributes that lend themselves to a BIP system include:
End-User (Payer) Profile for BIP
- Greater than $3 million in annual AP card spend
- Recurring payments to the same suppliers
- 10% to 20% of suppliers receive 80% to 90% of payments
Examples of end-users who benefit from BIP: healthcare/medical industry, universities, large corporations, small corporations with concentrated suppliers, and government agencies who want audit features.
Supplier (Payee) Profile for BIP
- Receives at least $30,000 in annual AP payments
- Not offering early payment terms already
- Ideal if accepting card payments already
As Bora noted, BIP also uniquely provides suppliers with quantifiable reasons to participate: lower transactional cost, less AR effort and control over payment timing. Yet not all BIP systems are the same.
Bora’s Payer Direct Hub® is one option; the distinguishing features are listed in the table below.
Payer Direct Hub® (PDH)
About Bora Payment Systems
Bora Payment Systems LLC, owns and operates the Payer Direct Hub® (PDH), a business-to-business Buyer-Initiated Payment service for purchase cards. PDH allows commercial card clients and resellers to pay invoices from a single website with minimal or no integration. The system reduces AP expense and boosts P-card revenue share for payers, while helping suppliers cut costs through reduced labor and precise control over interchange rate qualification. Payer Direct Hub® provides significant cost incentives for suppliers resistant to P-card transactions.