Please wipe drool before reading...
With the Thanksgiving holiday just around the corner, now would be a good time to jumpstart something for you to think about while you’re stuck in food coma, as we will be too (and there’s nothing wrong with this as long as it’s just on Thanksgiving, Christmas Eve, Christmas Day, and others ad hoc). There are a plethora of reasons for businesses to take the time necessary to evaluate and transform their payment methods from the run of the mill modes that nearly 60% of companies still abide by (that would be check payments to put it in laymen’s terms). However, it hasn’t been manifestly clear about the benefits for suppliers of electronic payments in the ever-shifting landscape of AP automation and that is a niche piece we’d like to discuss today.
So WIIFS anyways?
That’s What’s In It For Suppliers of course…? A bunch of things it turns out.
According to MasterCard, who offers advanced electronic virtual card payments to corporations, it’s as follows…
"For suppliers, card payments help reduce day sales outstanding (DSO) and lower
costs. In fact, among finance executives surveyed, 41 percent say that credit card
payments provide benefits to both buyers and vendors, with 12 percent believing
the advantage falls primarily to suppliers." - Excerpt from MasterCard Commercial Cards Whitepaper: Why CFOs Are Ready to Write Off Paper Checks
Among those advantages:
• Faster access to capital – The prospect of quicker payments helps suppliers
avoid more expensive financing options, such as factoring. And payment is
guaranteed, helping to reduce or eliminate bad debt.
• Reduced A/R costs – It costs 37 percent less for a supplier to handle a $500
card transaction versus a check or ACH.3
• Better forecasting – Improved visibility into the approval process arms suppliers
with higher quality data for forecasting.
• Fewer lost invoices – Improved accuracy of electronic over paper processing (we've got something to say about that here too FYI) reduces payment processing issues, including invoices that languish in the system.
We believe the general consensus is that paper is onerous across the board and requires more physical touches, time to process, and aggravation than does a well working system. The operative word there is well-working, because as we all know a process only can flow as smoothly as the systems which support it. If the undergirding systems fail or falter, that invariably causes process breaches and bottlenecks which then have to be addressed by the individual. However, it’s a general trend whether in private or business life that there are increasing numbers of apps or services available designed to take the pain out of labor intensive processes, and that certainly applies to electronic payment methods.
Sure, 100% of suppliers may not ever accept electronic payments, but that doesn’t mean that the number won’t rapidly approach 100% . As finance leaders get more comfortable with the paradigm and procedure to both making and receiving those types of payments, it will become an increasingly popular practice and the stacks of remittances, checks, and supported materials that flood inboxes and desks across the globe will steadily wane down.
So, with that at the heart of the message this week, we encourage you and yours to get some rest, enjoy your meal, and most likely enjoy watching the Lions win (which is most definitely a statistical aberration)!