Ditching Paper Checks for Automated B2B Payments? 5 Questions to Ask.

March 29, 2021

6 min read

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After months – or maybe years – of talking about switching from paper checks to digital B2B paymentsyour CFO is finally on board. The prospect of eliminating the $4-$20 check*, not to mention all the manual legwork of paying hundreds of vendors each month, is now too hard to ignore. 

After all it’s 2021. And cutting paper checks each month feels like going back in time. Not like retro-Marty McFly going back in time, either. More like the Stone Ages. 

But where do you start? What questions should you be prepared to ask a potential AP Payments provider?

Plethora of Digital B2B Payment Options

Many companies and even banking institutions can offer you automated vendor payments. There are even companies in the marketplace that can pay a few vendors at a time. But you may need to pay hundreds of vendors each month, view the original invoices, and retain detailed records of who approved the payment.

So that may point you in a direction of an automated payments provider that also offers AP automation services. That way, you can ingest and process your invoices and then see those same invoices when you pay them.

Or, you may already have a property management system/GL that does some of the invoice processing for you and you just want to bolt on an electronic B2B payment component.

Either way, there are quite a few options. But before you take the plunge, here are five questions you should ask.

5 Questions to Ask Before Automating your B2B Payments

1. What’s most important to my automation efforts? Cash back from spend? Greater efficiencies for AP team? A turnkey program?

Whichever benefit you’re seeking, there’s one thing to keep in mind: supplier network. If you are giving up checks in favor of electronic methods, your suppliers have to be on board. They have to be able to accept the electronic method that you use to pay them. For example:

  • Should your payments provider use ACH (an electronic transfer of funds from one bank to another), suppliers will need to provide their bank account details. So, whomever you choose needs to be a trusted partner who can keep those details safe.
  • Should your payments provider use virtual card (which generates rebates based on spend), the supplier has to accept the virtual card as a payment method. So, you’ll need a payments provider that has a large network of suppliers that 1) already accepts the card and 2) can get any remaining suppliers on board quickly.

That’s where specialty players (like Nexus) come in to play. If your B2B payments provider has a broad range of suppliers in network who accept card, but those suppliers aren’t your suppliers, don’t count on giving up checks soon or getting much cash back from your spend. Because you’ll need a sizable “onboarding” effort to get your suppliers to switch.

And who’s going to do it – you or the payments provider? Make sure you know that up front.

2. How much visibility do my auditors and company stakeholders require? Will they want to see the original invoice? Do they need to see approval history? What other visibility requirements are there?

Some companies and banks can technically pay your suppliers efficiently (after they get your suppliers on board with electronic payments – or you do the legwork for them). However, there are big gaps in visibility. For example, as you are approving payments, or checking historical payments, you can’t see the original invoice or every approver who OK’d them. You just know that the supplier’s payment was issued, and maybe its status.

If invoice and approvals visibility is important to you, don’t settle for limited insight into where things stand.

3. What visibility into digital B2B payments – and their details – will my suppliers have?

One of the top benefits of electronic payments is to reduce calls from suppliers asking, “Where is my payment?” Thus, if this is important to you, the payments provider should have a self-service portal where vendors can check all their payments – should they receive them via virtual card, ACH, check, etc. This portal should give them visibility into:

  • Payment status for all their transactions
  • Unprocessed virtual cards
  • Processed virtual cards
  • Refunded virtual cards
  • Banks into which any ACH transactions have been deposited

4. How quickly will my vendors get paid?

Of course, one of the top reasons many companies ditch paper checks and outsource their payments is because they want to pay their suppliers faster – avoiding the US postal service and any potential late fees.

However, not all digital B2B payments companies pay vendors as soon as they get money from you. Some providers will actually hold the money first (so they can earn interest on it). So, make sure to find out if there’s a hold on funds and, if so, how long it lasts.

5. How easy is it to reconcile with my general ledger/accounting system? What data will I have?

There’s no benefit to high rebates if you’ll have to spend significantly more time reconciling your payments with your property management system.

That’s why it’s critical that your digital B2B payments company provides you with all the data you need – ideally online in a secure portal – to reconcile your payments, whether they’re made with virtual card, ACH, check, or another payment method.

You should also inquire whether all the pertinent details will line up with your data. For example, if the outsourced payments provider issues checks on your behalf, will they be the same check numbers you issued?

Reduced Payments Time from 12 Hours/Week to 1 Hour/Week

Automated B2B payments are fast becoming a necessity for many companies. While the cost savings are real, the time saved is even more impressive. We have had clients reduce payment time from 12 hours a week to just one hour.

We’ve also had clients reduce their payments workload by 65%. And others who cover their outsourcing costs with their rebate revenue.

So, the question for many firms is not if, but when they’ll outsource their AP payments. Before you take that step, ask the right questions first.