Getting Ready for the Digital Payments Phase
June 9, 2020
Estimated reading time: 2 minutes, 46 seconds
It is anticipated that the COVID-19 crisis will be the catalyst for ending manual check printing and mailing in B2B payments. And it makes sense – the customer is digitally empowered, regulators are tech-savvy, and banks have transformed digitally. A redesigned vendor payment process will not only save time and costs but also guarantee security, speed, and time-saving.
What are digital payments? How are they better?
Digital payments replace checks with electronic payment methods such as ACH, virtual credit cards, and e-check. In return, companies get a stronger bottom line, greater cost savings, improved cash management, fast and secure payments, prevention of errors and fraud, and better vendor relationship management. Payments trends from the past decade indicate that businesses are turning away from checks. According to the Association for Financial Professionals, 81% of B2B organizations used checks in 2004. In 2019, this was down to an all-time low of 42%.
When your AP team is spread out across home offices, having a remote payment solution that is easy to access, can make your AP workflow quick and simple. Here are the benefits of outsourcing payments to a third-party:
Outsource vendor management & reduce risk with guarantee
Outsourcing payments to a third-party puts them in charge of collecting, updating, and securing sensitive vendor payment data. There is always a risk for your company when you are storing sensitive data in-house. A third-party solution can effectively manage that risk. Everything is conducted through a single platform – you simply approve an invoice and the third-party takes care of the rest. Vendors are paid according to their set instructions in their preferred method of payment securing your business from risks such as fraudulent payments. Time-consuming tasks such as collection and verification of vendor data, compliance, verification of duplication, setting up their preferred payment method, everything is handled by the third party.
When outsourcing payments, look for SOC compliance which is considered to be the highest standard in the payments industry. Also, ensure that the company will assume 100 percent liability for correctly paying vendors. With a secure payments provider, every transaction is insured with a payment guarantee or warranty. There is no risk of processing a duplicate invoice, fraudulent payments, errors, or delays in payments with document management.
Eliminate paper-based tasks & speed-up workflow
In a traditional vendor payment system, an AP team member receives an invoice, they pass it on for approval, source vendor payment details, and then line it up for payment. Calculate how fast this chain moves on a day to day basis without digital controls. With digital payments, your AP team can eliminate the manual cycle and costs of printing invoices, mailing checks, chasing approvals, stuffing envelopes, and collecting remittance information. Electronic payments are almost 10x less costly than paper check payments. Another benefit is the superior supplier experience. Digital payments solution offers a full range of payment and remittance information options for suppliers so your team doesn’t have to worry about managing multiple payment processes.
When a third-party payments system is involved, the reconciliation process becomes more agile. They guarantee that the payments are true and have reached the vendor.
Under your existing process, an AP employee might be cross-checking bank statements and your charter of accounts to ensure they match records. A third-party solution guarantees the payment has been conducted, so you can throw that entire exercise out and save time on the reconciliation process.
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The latest addition to this AI-backed feature-set is a tool called Line Item Capture, which further simplifies invoice data entry by extracting line item information, such as descriptions, unit costs, and quantities with 99%+ accuracy.
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Research has found that following up on invoices is a lengthy process, which can take up to 20% of a typical AP clerk’s time. Calculating exactly how much time your business spends on approvals can help you identify bottlenecks slowing you down.
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