Automated Electronic Payments – Come Out Ahead

August 17, 2020

5 min read

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With many school-age children slated to be at home or going to school in person just a few days a week, there’s a good chance some of your AP employees will soon be pulling double duty as teachers.

And if they don’t have kids to worry about, plenty of other things – including today’s distributed workforce – might slow them down. All of this might make it harder to pay vendors on a timely basis.

Enter automated AP payments.

While they have been around for a while, automated electronic payments have become a critical factor for AP success because they eliminate inefficiencies – exacerbated by the pandemic. Plus, they provide more control over cash.

Maximize AP Employees’ Time

One of the ways companies can maximize their AP employees’ valuable time is to take some of the manual and inefficient tasks off their plate. For instance, they can eliminate obtaining internal approvals (which can often mean sending a messenger across town to get signatures), cutting checks, stuffing them in envelopes, getting them in the mail, and managing all the subsequent supplier follow ups.

These tasks can consume many hours, sometimes days. This is especially true for real estate companies which have hundreds or thousands of vendors to pay each month. And for what value?

Use Automated Electronic Payments to Up Your Game

Automated electronic payments may seem a bit frightening for the uninitiated, especially to those managers who get some level of comfort of physically writing a check. But with automated e-payments, AP teams still have 100% control of when they pay their vendors. In fact, they actually have greater control and visibility throughout the payments process because everything is online.

They also enjoy benefits such as:

  • Improved Cash Management – AP teams can optimize payment schedules given it takes just a few minutes to pay vendors. Payments can be made weekly, instead of monthly, and teams can prioritize payments to vendors who give early pay discounts.
  • Cost Savings & Rebates – many programs provide rebates on spend
  • Allow for Working-from-Home – approvals are all electronic and completely visible
  • Better Relationships with Supplierspayments are trackable online

How Automated Electronic Payments Work

With automated e-payments, AP teams can send funds electronically to their suppliers with just a few clicks. A payments processor does most of the work – including securely disbursing the payments to the right suppliers.

At a high level, here are the steps that are included (hint – everything happens online):

  1. Generate a batch of transactions to-be-paid (i.e. a payment file) from your GL and send them to your payments processor.
  2. Designated employees are alerted via email that there are transactions awaiting their review. They can then approve or decline them with the click of a button upon logging in to an online portal. If need be, reviewers can check the invoices associated with each transaction right from the same screen.
  3. Once all transactions have been reviewed, those that have been approved are submitted for processing. Payments are automatically issued to suppliers, often in the form of virtual cards, ACH, and/or checks.
  4. If suppliers have questions about a payment, both the AP team and the suppliers themselves can log in to the online portal. There, they’ll all be able to see the same data, such as if/when payment was issued, virtual card information needed for processing, and details necessary for supplier reconciliation. If the supplier loses their virtual card details, AP employees can even resend the information to suppliers with the click of a button.
  5. When it’s time for AP to do their own reconciliation, they’ll be able to view when funds were debited – and from which bank accounts – in the portal.

It’s easy to see, then, how electronic payments can allow AP teams to get payments out the door very easily and efficiently. Even if they’re juggling myriad other tasks.

Implementing a New Payments Process Can Take a Month or Less

While programs may vary, some automated payment vendors can get you up and running with automated e-payments in a month or less.

They’ll even take on the heavy lift of contacting suppliers and encouraging them to convert from check to virtual card or ACH payments. The buyer companies simply need to reinforce the message about accepting electronic payments with suppliers. And this part usually isn’t too cumbersome, since suppliers see many benefits from switching too. These include:

  • Improved cash flow – because suppliers aren’t waiting around for a check
  • Lower risk of fraud – virtual cards are backed by a network, like Visa
  • No trips into the office – can be managed online, with data for easy reconciliation

In fact, Nexus data shows that supplier acceptance of electronic payment methods – particularly Nexus virtual cards – increased by an average of 42% a month for March, April and May 2020, compared to the same months in 2019. So, suppliers are recognizing what they stand to gain with digital payments.

Come Out Ahead from this Pandemic

According to a recent article from CFO Dive, about 8% of companies have a fully automated electronic payment system and about 16% have 75% of their payment systems automated. Companies that prioritize automating their payments are likely to come out ahead during these trying times.

In fact, the article cited a recent webinar, where payment specialists said, “The more integrated and automated your payment system, the more strategically you can spend. This goal is increasingly important as you try to stretch out your cash to get through the pandemic.”

Want to get started with automated electronic payments? Contact Nexus.