In today's digital era where regulators, banks, and consumers are increasingly tech-savvy and active online, businesses are experiencing a significant shift in how they handle B2B payments. Vendors and service providers now expect the flexibility to receive payment in the manner that suits them best. Many are transitioning from traditional methods like manual checks and moving towards digital payment options such as ACH or wire transfers.
Has your AP team embraced this change? There are many advantages for AP teams who embrace digital payments, such as fraud mitigation, error reduction, and improved vendor relationships.
In this blog post, we’ll explore how a modernized, digital vendor payment process will not only save your organization time and money but also delivers a more efficient and streamlined AP workflow.
What are digital payments?
Digital payments, also known as electronic payments or ePayments, are the exchange of funds without the use of physical cash or checks. Digital payments typically involve transferring funds between accounts using direct bank transfers, mobile or online financial transactions, or payment cards like debit, credit, or virtual cards.
Many businesses use multiple different payment types based on each vendor’s or service provider’s preference. The most common types of digital payments are:
- ACH Debit Pull: A payee requests a “pull” of funds from the payer’s account.
- ACH Credit Push: A payer starts the transaction by “pushing” funds into the payee’s account.
- Credit Card: A physical card used to spend borrowed funds up to a predetermined amount.
- Debit Card: A physical card used to withdraw existing funds from a bank account.
- Commercial Card: A physical card used to initiate direct payments from corporate lines of credit for business-related purchases.
- Virtual Card: Borrowed funds spent using a single-use 16-digit code, without a digital card.
- Wire Transfer: A real-time request for a transfer of funds between accounts.
How are digital payments better?
Digital payments offer many benefits, including:
Reduced manual tasks & errors
In a traditional vendor payment system, an AP team member receives an invoice, passes it on for approval, sources vendor payment details, and then lines it up for payment. In the coming days, they waste a lot of time and money chasing approvals, reviewing for duplicate payments, and manually keying in the data required to complete the creation and distribution of a manual check.
Digital payments, facilitated by an AP automation solution, streamline the entire process and enable 9X faster invoice processing. When your AP team receives an invoice, they simply input it into the automated workflow and the digital payment system takes care of the rest. This includes automatically routing the invoice for approval through a customized AP workflow, ensuring timely approval without the need for manual reminders, and on-time and on-budget digital payments to complete the cycle.
When you use digital payments coupled with an AP automation solution, you will:
- Alleviate the risk of processing a duplicate invoice, manual keying errors, and delays from missing or incorrect approvals.
- Eliminate manual and time-consuming tasks such as data collection and verification.
- Enjoy two-way sync with your existing accounting software to verify which invoices are paid.
- Benefit from one-to-one reconciliation from your accounting system to your bank account, ensuring payment accuracy.
Enhanced cost & time savings
Digital payments can be up to 10X less costly than cash or check payments because they eliminate the manual labor required to create the check as well as the operational costs of paper, printing, and postage.
Digital payments also require less manual involvement from AP teams, freeing them up to engage in more strategic and valuable work.
You don’t have to just take our word for it! You can calculate how much AP automation will save your organization with this ROI calculator.
Improved cash flow management
Digital payments are processed much faster than checks, often settling within hours or instantly, whereas checks can take days or even weeks. This accelerated processing time means you see payments more quickly in your bank account which greatly improves your cash flow.
The AP automation workflow that comes along with digital payments also adds an extra layer of visibility into the entire process to help you make well-timed decisions and maximize the use of your cash. Real-time reporting and tracking allow for accurate monthly accruals, enhanced visibility into invoices upon receipt and throughout the approval process, and the necessary information to optimize cash flow decisions.
Increased fraud prevention
Paper checks are vulnerable to physical theft, alteration, and forgery, making them less secure and more prone to fraud than digital payments.
Digital payments, on the other hand, offer many more layers of security, including:
- Encryption that makes it harder for fraudsters to intercept or tamper with the payment information.
- Multi-factor authentication methods, such as passwords, biometrics, or one-time codes, are required to verify the user's identity.
- More robust fraud detection mechanisms in place, including constant monitoring for suspicious activities and irregularities.
Improved vendor relationships
Companies that collaborate strategically with their suppliers often enjoy benefits over their industry competitors, not to mention cost-savings thanks to strengthened supplier relationships.
Digital payments are just one of the ways you can enjoy improved vendor relationships. By allowing your vendor to choose the type of payment method that works the best for them, you’re showing increased cooperation that they will appreciate. This, in turn, can help you unlock additional savings such as vendor discounts.
Quadient AP can help you embrace digital payments
If your organization is ready to embrace digital payments, Quadient AP is the solution you need. Quadient's AP digital payment functionality will save your AP team time and money while reducing fraud, increasing workflow visibility, and improving vendor relationships.
Book a demo with us today to see how we can help your organization adopt digital payments!
