How To Help Your Vendors Embrace Digital Payments
by Elisabeth Harvey
Relationships keep businesses afloat. And vendor relationships? There’s nothing more precious. The timely delivery of supplies is essential to the smooth operation of any corner market, fast-casual restaurant, club, hotel, or retail establishment.
So—how do you cultivate a mutually beneficial arrangement between your business and those folks who deliver your fresh produce, toilet paper, equipment and services? How do you lock in pricing and ensure you’ll be first to know if there’s a mishap on the loading dock?
It’s easier than it sounds. Pay your suppliers promptly and accurately. Better still—pay them digitally.
Have you ever wondered if cutting a check is still “best practice”?
Short answer: it’s not. Cutting a physical check, putting a stamp on it, and giving it to the post office to deliver whenever they’re able to get around to it is, at best, unpredictable. At worst, it’s a wildly erratic form of paying your vendor, especially when the digital alternative is so efficacious. For the best way to pay a vendor (and how to help them understand its importance), keep reading.
When you help your vendors—if you prioritize the prompt payment of their invoices, for example—they’ll absolutely be there for you when times get tough. Deepening your relationship with your vendor will always pay dividends.
Pymnts.com shares that 81% of companies still cut physical checks instead of paying vendors electronically. If the benefits of electronic payments are well known and numerous, why do so many industries still rely heavily on paper checks? It could be because vendors insist on paper… but it could also be that the payment-issuing company hasn’t recently considered how best to pitch the efficacy of digital payments.
Businesses of all shapes and sizes list myriad reasons for clinging to paper check systems:
- Fear of change
- Lack of support from senior management
- Inadequate resources to manage implementation
- Competing priorities
One of the biggest reasons that keeps companies from shifting to digital payments is the assumption that their suppliers will reject the idea. But what if it’s just that—an assumption? What if the tide has turned, and vendors are more receptive than ever to the idea of receiving payments electronically?
There are a few direct ways to convince your vendors to accept e-payments. Let’s take a closer look at:
Why Your Vendors Haven’t Yet Accepted Electronic Payments
How Vendors Benefit From Electronic Payments
Convincing Your Vendors To Accept Digital Payment
Final Thoughts: What You Need To Know To Pay Vendors Digitally in 2022
Why Your Vendors Haven’t Yet Accepted Electronic Payments
In most cases, vendors have always been paid in paper checks or cash. But getting on board with digital payments may be higher on their priority list than you expect. Some experts estimate that 60% of all B2B payments in the market are now made digitally.
Besides that, there are other reasons your suppliers have yet to adopt electronic payments:
- They don’t want to rock the boat: Some vendors believe that since they’ve always payed bills with paper checks, the status quo is good.
- They want to avoid fees: Some suppliers accept paper checks to avoid debit or credit card fees, unaware that there’s also a cost to process check payments. Checks must be mailed and processed, which consumes valuable time and resources.
- They’re worried about security: Vendors who only accept paper checks may believe that electronic payments are less secure. They might not understand how electronic vendor payments work (and are, in fact, more stable than check payments).
- They think switching to a new payment method will be too time-consuming: Suppliers may feel a switch to electronic payments is too tall a mountain to climb, especially if they already have a system working for them. This is where you can pop in, and cheerfully point out how easy it is to get started by receiving digital payments from you! Their Accounts Receivable (AR) department won’t mind updating their process, if they have a friendly business partner to help them through it.
If your vendor is resistant to being paid electronically, you may have to demonstrate the value of digital payments. Show them it’s a win-win for everyone involved by giving them a quick run-down of the benefits (and security) of electronic payments.
How Vendors Benefit From Electronic Payments
Checks were cutting-edge technology when they were new. (Hard to imagine, but true.) And… cutting-edge tech has come a long way, particularly in finance. While check payments may seem cheaper, the cost of writing, tracking, and mailing each individual check are often completely ignored. And those costs are enormous.
Your vendors can benefit from electronic payments in the following direct ways:
Reduced Processing Fees
Paper checks are more expensive for small businesses to use than electronic payments. That’s because, besides processing fees, checks have many incidental and manual labor costs. Digital payments eradicate those costs.
Physical check transactions cost between $4 and $20 each. That’s right—on average, a single paper check costs $4 to $20. And even more, if the check bounces. A single bounced check can cost between $20 and $40. Your bank will charge an overdraft fee, your supplier will get an overdraft fee, and your supplier may charge you, too, for the inconvenience.
In contrast, Plate IQ charges no fees for electronic payments. Clients choose from (or mix and match) automated clearing house (ACH) payments, VendorPay, and virtual cards (vCards). Digital payments are processed directly through the Plate IQ dashboard. It’s even possible to use Plate IQ to cut the occasional check—at no extra fee.
Security
Digital payments are not only more efficient, they are also much more secure than paper checks. For example, virtual cards work just like individual credit cards: they have account information stored in a card provider app or digital wallet. That is much more difficult to penetrate than your main bank account.
vCards have randomly generated numbers for a single or multi-use card, and the 16-digit controlled payment number is unique and can never be reused. That means no one can intercept payments or bank information. No chance for fraudulent charges.
With 98% of businesses experiencing financial losses due to successful fraud attacks in 2021, digital payment solutions such as Plate IQ’s vCard and VendorPay network options present a huge advantage.
Faster Payment
You can transfer funds to vendors’ accounts much faster with digital payments, rather than traditional paper checks.
For example, ACH transactions (which are electronic funds transfers, or EFTs, and operate like wire transfers) — are usually deposited into your vendor’s account within one to three business days. On your end, that means you can make a payment in real-time without needing to go to the bank.
In contrast, your company and the vendor is at the mercy of the post office, dedicated courier, or whichever private shipper you choose to deliver your check runs. Invoices that are paid via paper checks are nowhere near as promptly paid as digitally processed invoices.
Using electronic payments to eliminate the unpredictability of mail delivery is an excellent idea for your vendor’s financial peace-of-mind.
Complete Transparency
Digital payments offer complete transparency throughout the entire payment process. Business owners and suppliers alike can check on the status of payments, track invoices, and breath a little easier.
Automated processes also provide greater control over outgoing cash flow. Manual processes are error-prone. This combination of transparency and greater control over payments make it easier for any AP department to detect suspicious or fraudulent activity.
Convenience
Digital payments offer a truly convenient payment experience to all who take advantage of the technology.
A vendor who has enabled digital payments can turn around and buy goods on credit by providing their supplier with a “pay later” option. And, instead of that supplier constantly reminding their partner to pay up, that supplier can utilize their digital payments system to automatically collect money owed, after a specific period.
How To Convince Your Vendors To Accept Electronic Payments
As compelling as the above benefits are, if it’s something new for your vendor, you still need a strategy to convince them to accept electronic payments.
Here are the steps we recommend:
- Determine who to talk to. Examine your spend to identify which vendors are good candidates for electronic payments.
- Segment those vendors into “likely to adopt,” “hesitant,” “really hesitant,” and develop an adoption approach for each group. Who will respond better to a phonecall? Who would prefer you walk them through it next time they’re in town?
- Engage each group based on the plan you developed for their segment.
- Create a follow-up plan for supporting the vendors after they “enroll” in your digital payment program
- Analyze your spend file regularly to identify new opportunities to onboard more vendors
Final Thoughts: What You Need To Know To Pay Vendors Electronically in 2022
Remember: it’s your relationship with your vendors that is responsible for the smooth operation of your business. And processing paper checks slows down everyone’s payment processing workflow, negatively impacting cash flow on both ends. Wouldn’t your vendors appreciate a more efficient, more reliable and less time-consuming way of getting paid? Digital payment is the stable, forward-thinking alternative everyone deserves. And (now) you have a plan for how to help your vendors adopt this new method!
Digital payment methods are faster, safer, and more affordable for small businesses— and your AP Department will save money on every invoice by switching vendors over to electronic payment methods.
Integrating electronic payment solutions is one way to release your team from the hassles and risks of paper checks. Streamlining your payment process across your entire AP workflow is another, and Plate IQ can help! Improve backoffice bandwidth, and deepen your relationships with your vendors. Request a demo of Plate IQ’s VendorPay today.
Elisabeth Harvey writes for Plate IQ, covering technology in the hospitality industry from a background in specialty foods marketing and co-operative grocery management.
Stay up to date on the latest news in AP automation and finance
Related
