The Biggest Questions Vendors Have About Payment Automation

Whether your organization has begun adopting AP automation or not, you’ve probably been hearing a lot about payment automation lately. With this technology, you can view payment statuses in real time, manage vendor inquiries, and pay your vendors easily via check, ACH or credit card. All payment information is saved and stored on an easy-to-use secure platform that syncs with your ERP or accounting platform, bringing you seamless data integration.

Why Vendors Still Use Paper Checks

In B2B environments, some vendors still prefer to receive payments by paper checks rather than ACH, credit cards, or virtual credit cards, despite the growing trend toward digital transactions.

But why is this continuing?

Familiarity and control comes to mind, first of all. Paper checks have been a longstanding method of payment in the business world. Many vendors are comfortable and familiar with the process, staffing, and accounting practices around handling checks. This familiarity often translates into a sense of control over the payment and deposit process, as checks provide a tangible, physical record of the transaction which can be tracked and reconciled manually.

Another aspect sometimes heard from vendors is that ACH, credit card, and virtual card fees are eating into their profit margins. ACH transactions, while often lower in cost compared to credit cards, can still involve charges and timing issues. Credit card transactions incur merchant fees, which can range between 1.5% to 3.5% of the transaction value. Virtual cards, a newer technology, often include higher transaction fees and additional administrative costs for setting up and managing these payments. On the other hand, paper checks–despite some costs associated with processing, printing, and mailing–avoid recurring fees.

It’s also not uncommon to hear vendors say that paper checks allow them more control over their cash flow. Even when a check is received, they can decide when to deposit it, which can be advantageous for managing daily finances and bank account balances. With digital payments, funds are typically transferred faster, and this can disrupt cash flow management if payments aren’t timed to the vendor’s financial strategies.

One other reason vendors prefer paper checks is because, in certain industries, businesses may be required by law or regulation to issue payments by check. This is more common in sectors that involve large sums, complex transactions, or stringent regulatory oversight.

Payment Automation Basics

Payment automation in accounts payable refers to the use of advanced digital technologies and software solutions to streamline and optimize the process of managing and disbursing payments to vendors. Traditionally, AP processes have been manual and labor-intensive, involving tasks like data entry, paper-based invoicing, and physical check issuance. These methods are not only time-consuming but also prone to errors, inefficiencies, and delays.

With payment automation, all invoicing and payment data is accessible on an easy-to-access online platform where an AP department can pay invoices easily via virtual card payments, ACH, or check. Several features, in particular, are that an AP department has real-time access to the status of payments and is able to save all vendor payment information and preferences on the platform.

For an AP department, the benefits of payment automation include:

• Efficiency and Speed: Automated systems can process payments much faster than manual methods, greatly reducing the payment cycle time.
• Accuracy: Minimizing human involvement lowers the risk of data entry errors and ensures that payments are processed correctly.
• Cost Savings: Automation can significantly reduce administrative costs associated with manual processing, including labor and materials for printing and mailing checks.
• Compliance and Security: Automated systems are designed to comply with regulatory standards and often include features like fraud detection and audit trails, enhancing overall security.
• Transparency and Control: Real-time tracking and reporting capabilities provide greater visibility into the status of payments, helping organizations maintain better control over their cash flow.

In summary, payment automation in accounts payable represents a significant advancement in financial operations for an AP team, offering increased efficiency, accuracy, and security. As many businesses strive to become more agile and cost-effective, the adoption of payment automation is set to grow, transforming the way organizations manage their financial transactions.

Vendor Frequently Asked Questions

Whether you're new to payment automation or you’re simply looking to deepen your understanding, we’re going to address the most common questions vendors have about how automated payment systems work, their benefits, and how they can enhance B2B financial transactions.

How does payment automation benefit my business?

Automation offers a number of benefits when you choose to receive payments in this manner. First of all, automated systems expedite the payment process and make your payments more quickly. Automation also reduces errors associated with manual data entry, resulting in more accurate payments.

Because payment information is available on a single, integrated online platform, real-time tracking and notifications provide you with up-to-date information on payment status. So, any inquiries related to payment status can be answered more quickly than they could if our AP department is processing payments manually. Additionally, automated systems include robust security measures and help ensure compliance with regulatory standards, reducing your risks.

How do electronic invoicing (e-invoicing) systems work?

Electronic invoicing (e-invoicing) systems streamline the entire invoicing process by digitizing and automating the handling of invoices. Here's how it works:

• Invoice Submission: Vendors submit invoices electronically, typically in formats such as PDF, XML, or EDI. These invoices are directly uploaded into our e-invoicing system.
• Data Extraction and Validation: The system uses OCR (Optical Character Recognition) and advanced data capture technologies to extract key information from the invoices. This data is then automatically validated against purchase orders and receipts.
• Approval Workflow: Once validated, the invoices enter an automated approval workflow. Any discrepancies or issues are flagged for review. Approval hierarchy and rules are predefined, ensuring a smooth and fast review process.
• Payment Processing: Upon approval, the invoice is queued for payment. Payments are processed according to vendor preferences, whether they want to be paid by virtual credit card, corporate credit card, ACH, or check.
• Tracking and Reporting: The system provides real-time tracking of invoice status and generates detailed reports, offering transparency and enhanced control over financial operations.

Will I need to change my invoicing format for payment automation?

In many cases, you will not need to change your invoicing format when an accounts payable department adopts payment automation software. Modern payment automation systems are designed to be flexible and can typically process various invoice formats, including PDF, XML, and even paper invoices that are scanned into digital form. However, switching to electronic invoicing (e-invoicing) can further streamline the process, ensuring faster and more accurate processing.

The accounts payable department will usually provide specific guidelines or templates to ensure seamless integration with their automation system. Adhering to these guidelines can enhance efficiency and reduce the risk of errors. For the best experience, you may consider adopting standard e-invoicing practices, like including essential details (invoice number, date, line items) in a machine-readable format.

If you're unsure about the requirements, it's a good idea to reach out to the accounts payable team for clarification and support.

Are there any costs on my end when implementing payment automation?

Typically, there aren’t any costs to you as a vendor when payment automation is implemented. Most modern payment automation systems are designed to integrate seamlessly with existing invoicing processes and require no additional software or hardware. For specific details, please consult with our accounts payable team.

How does payment automation handle disputes or discrepancies in invoices?

Payment automation systems are designed to efficiently manage disputes or discrepancies in invoices through several automated and manual processes:

Automated Validation. Upon receipt, invoices are automatically validated against purchase orders, contracts, and delivery receipts. This initial check identifies discrepancies such as price differences, quantity mismatches, or missing information.

Flagging and Alerts. Discrepancies are flagged, and alerts are sent to the relevant accounts payable and vendor contacts. This ensures timely awareness and resolution of issues.

Automated Workflows. The system routes flagged invoices through predefined workflows for review. Assigned personnel can quickly assess and address the discrepancies.

Communication Portal. Many payment automation systems include a vendor portal, providing a platform for real-time communication. Vendors can view issue details, submit corrections, and track resolution status.

Audit Trails. Every action taken to resolve the dispute is logged, creating a transparent audit trail for compliance and future reference.

Is payment automation secure?

Yes, the payment automation process is highly secure, and it incorporates multiple layers of protection to safeguard financial transactions and sensitive information. For one, all data is encrypted, and this means that all data transmitted and stored within the system is encrypted using advanced encryption standards. This ensures that unauthorized parties cannot access or interpret the information. Robust user authentication mechanisms such as multi-factor authentication (MFA) also ensure that only authorized personnel can access the system.

Inside the AP department, role-based access controls limit employee permissions based on their assigned roles, minimizing the risk of unauthorized actions. Additionally, comprehensive logging of all transactions and user activities creates an audit trail. This enhances accountability and facilitates the detection of suspicious behavior.

In regard to fraud detection, advanced algorithms and machine learning techniques are employed to identify and flag irregularities that may indicate fraudulent activities. Our systems also adhere to industry regulations and standards, ensuring legal and regulatory compliance.

Altogether, these measures collectively ensure that the payment automation process is secure, protecting both your business and financial transactions.

Will payment automation ensure faster payments?

Yes, payment automation significantly speeds up the payment process. By automating the handling and approval of invoices, our system minimizes manual intervention, reducing processing times and human errors. Electronic invoicing allows for immediate receipt and validation of invoices, while automated workflows expedite approvals and payments.

The system also ensures timely payments through your preferred payment method, eliminating delays associated with manual payments processing. Additionally, real-time tracking and notification features keep you informed of payment status, enhancing transparency and coordination.

Are there any ongoing maintenance requirements for payment automation?

Payment automation systems generally require minimal ongoing maintenance. The primary responsibility often lies with our accounts payable department to ensure the system runs smoothly. However, you can help by keeping their invoicing practices consistent and up-to-date, promptly adopting any updates or changes communicated by our accounts payable team.

Regularly verifying and updating your contact and bank details can also enhance efficiency. Additionally, participating in any periodic training or system updates ensures you stay informed about best practices and any new features that may improve the invoicing process.

Ready to Start Using Payment Automation in Accounts Payable?

If it’s time to make streamlined AP processes, simplified payment processing, and improved vendor communications part of your department’s operations, please contact CloudX today for a complimentary demo of our APSmart and PAYSmart automation software solutions.