9 Things Companies Need to Know to Automate Supplier Payment

Digitizing supplier payments has long been on the roadmap at many corporations, but way down near the bottom, according to panelists at a recent IOFM Virtual Town Hall Meeting: The B2B Payments Answer Forum. Either people didn’t have the budget, thought it would be a heavy lift for AP and/or IT, or just felt like checks were working. They may not have been optimal, but the processes for producing checks were well established and had been sustained over decades. 

That all changed in 2020. COVID-19-related health and safety requirements and the mass-scale remote work changes demonstrated that check-writing processes are no longer sustainable and accelerated the move toward electronic payments. 

In a poll of 163 AP and finance professionals conducted during the forum, 35 percent of respondents said their electronic payments volume had increased by more than 10 percent in the past year. Only 16 percent of attendees said there had been no change. 

The Forum, hosted by Mark Brousseau, a consultant and thought leader on accounts payable, accounts receivable, payments, and document automation, was designed to answer the most pressing questions as companies seek to further automate their processes and eliminate paper checks.

Forum participants included Brian Greehan from Bottomline; Anand Misra at Tipalti; Daniel Ball from Medius; and myself, Mark Penserini, representing Nvoicepay. 

Here’s what was on the mind of forum participants and attendees that companies looking to automate payments should know:

1. Options abound. As evidenced by the diverse suppliers represented on the panel, companies seeking help automating payments have many options—options that didn’t exist a decade ago.

“A lot of the technologies we’re going to talk about today weren’t a strong option seven, eight, nine years ago,” said Brousseau. “The tech has met the business demand now.”

2. Payments—even global payments—can be simple. With modern technology and the right partner, making payments should be push-button simple. Accounts payable should be able to approve invoices for payment and push one button to send the whole payment file to the partner, who will sort out who to pay by what method, and handle supplier enablement. Even global payments can be handled through the same process with little IT involvement.

That should give AP professionals a lot more time to focus on strategic initiatives, and no time focusing on what payment method to choose and how to transmit it to the bank. 

3. Suppliers want electronic payments. The move toward electronic is being driven by both accounts payable and accounts receivable. Suppliers are reaching out proactively and requesting electronic payments. Within the first six months of the pandemic, several AP people asked to move to some kind of digital payment, because they just didn’t have time to pick up the mail anymore.
4. Attitudes toward card acceptance are changing. It has long been believed, mostly because it has long been true, that suppliers would not take card payments due to acceptance fees. That attitude is changing. Cards are the fastest and most secure way for suppliers to get paid, and many will eat the fee to improve cash flow. 
5. Choice is important. While there was some discussion of requiring suppliers to take a particular form of electronic payment through contractually negotiated terms or conditions of trade, most agreed that offering suppliers a choice is important.

“If you want to be entirely relevant to an organization, you have to accommodate some choice,” said Greehan. “There are a lot of payment vehicles to get you where you want to go.” The key, he said, is figuring out what kinds of options are relevant for your supplier base.

6. Remittance is easier. Part of the reason checks have persisted is that the remittance data and the payment arrive together, making it easy to apply payment. That hasn’t been the case with ACH and card payments, but it’s improving.

“We’ve seen over the last few years systems evolving to allow for you to send those artifacts electronically attached to the payment,” said Ball. “That’s giving suppliers much better visibility because it can get quite complex when you need to provide supporting evidence as to what the payment relates to.”

7. It’s not such a heavy lift. New technology, supplier networks, and service offerings have made automating payments one of the easier transformations. In the era of SaaS, API connections have become much easier, and supplier networks have been given new life by the cloud and access to data. Many software suppliers have assembled sizable proprietary networks of suppliers they’ve already enabled for electronic payment. While you can’t get a list of all the suppliers in their network, what most will do is take your supplier list, run it against their database and tell you how many of your suppliers you could start paying electronically immediately through their network. That gets you up and running quickly. 

They also take on the whole enablement process for their customers, including collecting, storing, securing, and maintaining supplier banking data. That includes protection against fraudulent attempts to change bank account data and divert payments to criminals.

This has long been an obstacle to electronic payment adoption. People in AP “don't want to be managing master data and becoming the custodians of it,” said Ball. “All of that is a massive overhead. And it's a distraction from what they should be doing.”

8. Be strategic in your choice of solution. There's a lot of solutions out there so consider what you are trying to achieve. Is it to get rid of paper processes? Optimize rebates? Increase visibility? Enhance security and controls? Better manage payment terms and cash flow? Consider how the solution addresses your current payment processing challenges, and how it will scale with your organization.
9. Look at the big picture. Don't focus on optimizing payment methods. Put that in the hands of people whose business that is. Look at AP automation as a single continuum, of which payments are just one piece.

“There are benefits to be gained from not just automating payments, but the entire operation, which includes the invoice automation, processing automation, which includes your approvals, and your integration with ERP systems,” said Misra.