How Streamlining Payments Helps Build Vendor Relationships

November 23rd, 2021 Kim Lockett Leave a comment

I’d like to dispel some common misconceptions about B2B payments. First, the misconception that vendors don’t want to be paid by check. Next, let’s dispel the notion that vendors won’t take card payments.

I’ve worked in payments for a couple of decades now. I’ve managed cash handling, check processing, and lockbox operations. I’ve spent the last 10 years or so in the Mastercard B2B space. Based on my experience, I can tell you what vendors really want: convenience and choice.

Doesn’t everyone?

New choices

It used to be that the customer could dictate a payment method and vendors had no choice but to accept. That has been slowly changing. We saw a lot more vendors raising their hands to ask for electronic payments during the COVID-19 Pandemic, but this shift began even before that. Fintech companies have introduced a lot of new payment options, and vendors are more aware that they have choices.

It now falls to buyers to give vendors the convenience and choice they want, without overburdening their accounts payable departments. That means using automation to streamline payment and vendor enablement workflows. AP can then easily accommodate all payment types and let vendors choose what’s most convenient for them.

Different definitions of convenience

When vendors want to be paid by check, it’s often because they have some sort of mechanism that makes it easy to process them. In larger companies for example, that often means using their treasury bank to do lockbox processing for them. Banks will often provide this service for free to win other, more profitable business.

The bank collects all the checks from the lockbox, keys in the data and deposits them. All accounts receivable has to do is absorb a file that has all of the check data. That is a pretty clean process, and a compelling reason to be paid by check.

What about ACH? There’s no paper to handle, and the vendor gets the money faster. Why wouldn’t they want ACH payments? Well, ACH fraud is on the rise, and not all vendors want to risk exposing their banking data to their buyers.

Vendors might actually prefer a single use credit card. The common wisdom against that thought is that vendors won’t want to pay credit card fees. The reality is that virtual cards are gaining in popularity because you get paid fast and fraud risk is low. You don’t have to expose your banking data, and the card number becomes unusable once it’s been processed. For some vendors, that’s worth the fee.

No limits

The point is there’s a market for all payment types. For a buyer to limit themselves to just one or two payment options is to potentially limit whom they can do business with. With all the supply chain problems we’ve been experiencing it’s incredibly important to keep your vendors happy. The best way to do that is to make sure they get paid on time, in the manner of their choosing.

The problem, as many AP teams learned during the pandemic, is that doing electronic payments at scale is a lot harder than it seems at first glance.

You need to have the resources to enable vendors for electronic payments, on an ongoing basis. That means continual outreach to find out which vendors will accept a card or an ACH. It means collecting and verifying their banking data when you onboard them, and having processes in place to verify any requests to change bank account information. It means having a way to know if a virtual card payment hasn’t been processed, and a way of dealing with a card that is still open.

You also need very strong systems and processes in place to protect your organization against ACH fraud. If you’re not up to speed on using technology to validate and secure vendor information, and fend off fraud attacks, you’re putting your organization at risk.

AP teams already tend to be short-staffed. Turnover is high, and the amount of process documentation they have is low. They don’t have the capacity to take on this extra work.

Here’s where it gets good: AP teams shouldn’t have to take on extra work to make electronic payments work. The whole process can be streamlined by working with a payment automation provider. Automation providers typically provide a single workflow for all types of payments. All the person in AP has to do is select who to pay, and the provider will pay each vendor by their preferred method.

More importantly, automation providers take on all the work of enablement, including outreach and safeguarding vendor data. They also indemnify their customers against fraud. It couldn’t be more streamlined–all AP really has to do is click pay.

Convenience and choice for all

Checks have been the prevalent B2B payment method for a very long time, and for some very good reasons. The COVID-19 Pandemic, and our current supply chain woes, have made many organizations reconsider check use.

Vendors are increasingly aware that they do not have to let the buyer dictate how they get paid. Vendors now know that they are able to come to buyers and say, “We’ve got three payment options for you to choose from,”.

Fintech companies are providing new choices for buyers, too. Payment automation lets them offer vendors convenience and choice, without inconveniencing themselves. It’s a win-win, and that is the best possible way to build a relationship.

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Kim Lockett is Vice President of Customer Success and Services for Nvoicepay, a FLEETCOR company. She has more than 30 years of experience in payments, with a heavy focus on back-office operations and customer engagement. Prior to Nvoicepay, Kim held operations management and leadership positions with Comdata, Crestmark Bank, and Regions Bank.

Archives, Banking, Global Trade Daily, Special Reports

How Remote Work Lends Itself to Reshaping the Back Office

May 25th, 2021 Kim Lockett Leave a comment

The pandemic has been hard on everyone in different ways, and though the end is in sight, we’re not there yet. But, as we close in on a year and a half of working from home, we can look back with some perspective and perhaps a little pride at how we’ve adapted and changed. During this time, many people and organizations have discovered that they’re much more nimble, creative and resilient than they previously imagined.

I can see that in the accounts payable organizations with whom I have worked. The dual challenges of figuring out how to get payments out the door in a different way and learning to work remotely have been daunting, but people have figured out ways to get the job done.

Perhaps more than any other function, AP used to be a strictly in-the-office job, mainly because of all the paper processes they had in place. Invoices come in the mail. They have to be opened and keyed into accounting systems. Some companies have machines and OCRs (Optical Character Recognition) to help with this process, but many still follow manual processes. Checks must be printed, stuffed into envelopes, and run through a postage meter before they’re mailed. Security and controls are often paper-based, too—safes are kept for blank check stock and sensitive information.

It seems incredible to think that a year and a half ago, that was business as usual for the vast majority of organizations, and not many had plans to change. But change they have.

A New Way of Thinking

Nobody had a plan for sustained remote work. They may have had a short-term disaster recovery plan—for one or two people to work offsite or cover for the absence of a key employee. But nobody had a plan for the entire AP team to be out of the office indefinitely.

The initial struggle was to be able to continue processing payments on time. People brought their laptops home, but not their whole setup. They kept sending skeleton crews to the office to handle the paper processes. The thought was that we’d have to stick it out for a short period. We all know how that turned out.

Around the latter part of April 2020, we started to see people planning for the longer term. Companies set people up with home offices and all the security and connectivity they needed. They had to figure out new ways to communicate and collaborate. They had to figure out how to be productive at home, in many cases while juggling childcare and homeschooling.

At the same time, they started switching vendors to ACH payments in earnest. According to recent data from Nacha, the National Automated Clearinghouse, B2B ACH payments to vendors jumped a whopping 11 percent in 2020. They had to figure out new processes and new ways to keep information secure. Both of those are heavy lifts, which is a big part of the reason paper has persisted for so long.

It has been challenging to say the least, but I think that AP teams should be proud of how they’ve adapted.

Where to go from Here

Probably not back to the office—at least not five days a week. According to a recent report by Upwork, roughly one in four Americans will be working remotely in 2021. By 2025, 36.2 million Americans are expected to be working remotely, an 87% increase from pre-pandemic levels. A survey by the Pew Research Center found that given the option, more than half of employees say they want to keep working from home even after the pandemic abates.

Employers are becoming comfortable with the idea and are even finding some advantages, including access to a much larger talent pool and the ability to offer flexible work hours as a benefit. That could help AP to address the long-standing talent shortage.

The more significant opportunity, though, is to continue to think differently. I would be surprised if very many AP departments decide to return to the paper processes of old. The biggest reason people stuck with those for so long was that they were “working.” It’s hard to say that now. It’s also hard to say that accounts payable work can only be done in the office because we’ve been doing it outside the office for a year. The considerable delay in payment processing that some people expected never materialized. AP had to find a better way, and they did.

Moving Forward

They shouldn’t stop there. AP organizations should seize the moment to bring in technology partners to automate the entire payment workflow, address the growing fraud and security risks associated with ACH payments, and ensure the resiliency of payment workflows in a remote work world. They should be looking to automate invoice ingestion and processing and integrate into other transactional systems, eliminating manual work once and for all.

Nobody likes being forced to change, and that’s been perhaps one of the most difficult aspects of the experience we’ve all been living through for the past year. Now that AP teams have proven they have the resiliency and the ability to handle all the change that was thrust upon them, they should seize the opportunity to become drivers of change and key players in leading their organizations into the future.

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Archives, Banking, Global Trade Daily

How to Support AR with Electronic Payments

April 10th, 2020 Kim Lockett Leave a comment

Plenty of arguments exist against using paper checks in business, primarily due to the burden they put on accounts payable departments. Even so, check payments are still prevalent for several reasons. They’re easy to launch and universally accepted—though that is beginning to change.

Until the relatively new rise of payment automation, paying customers’ suppliers through electronic means required tremendous enablement efforts on top of figuring out data storage and maintenance processes. But, there’s another hidden reason: Checks are easy for accounts receivable (AR) to deposit and reconcile.

In a rare display of business payment support, banks have stepped up to offer lockboxes to their larger customers–often for free–in order to sell other types of services. In these scenarios, the lockbox provider receives mailed checks and deposits them to the customer’s account. Then they record the remittance data (e.g. invoice numbers, PO numbers, payment amounts) from check stubs and create a digital reconciliation file aggregating the data for each check received.

Map, reconcile, done

For banks to make this process work, some initial file mapping has to take place to enable the transfer of data into the customer’s ERP system. Once that’s done, reconciliation files send to AR through email or a secure File Transfer Protocol (FTP). AR must then pull the file and run a reconciliation process on it. The occasional item might not post because the invoice or account number was incorrect, but now you’re dealing with exceptions instead of with every payment. It’s not a truly digital process, because the lockbox provider still does manual check handling and data entry, but from AR’s perspective, it’s as good as automated.

Compare that to the reconciliation processes for ACH, card, and wire payments. If you’ve ever worked in accounts receivable, you know the number of incoming emails for electronic payments is overwhelming. There’s no standard file format for reconciliation; one might be in a PDF attachment while another is supplied directly in the email message. All the necessary details could appear in one place, or you could receive a truncated number with a request to retrieve the remaining data in an online portal. Some customers might not even send remittances for ACH or wire payments, forcing AR to match bank statements in their ERP.

Why AR prefers checks

The lack of file format compatibility makes it impossible to map remittances to a supplier’s ERP system or even develop a consistent workflow. When your team is processing hundreds of payments a day, matching each electronic payment to a remittance is painstakingly time-consuming. I can say with 100 percent confidence that AR would rather receive paper checks through a lockbox because it goes straight to their bank, and they only have to process one digital remittance file from their bank.

As third-party payment automation providers continue to gain market share, AR teams are seeing a heavier concentration of electronic payments. Even so, nothing has really changed from their perspective. Twenty payments issued by their customers through electronic means is still 20 payments they have to process manually.

Offering lockbox for electronic payments

The dissonance caused by this auto-to-manual problem highlights an opportunity for payment automation providers to include accounts receivable in their end-to-end solutions offerings. Nvoicepay has found success in extending payment aggregation services to a number of our customers’ suppliers. Those suppliers’ AR teams now only have to reconcile a single payment pulled right into their ERP, mirroring the capabilities of the lockbox for checks.

We all know the check game is slowly coming to an end. Many suppliers have sacrificed the convenience of lockboxes so their customers can opt for different payment methods. Some larger suppliers aren’t even accepting checks these days.

For decades, automated check reconciliation stood out as the lone sanctuary for AR professionals. However, the advent of payment automation indicates that electronic payment reconciliation is more than capable of taking up the baton.

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Kim Lockett is the Director of Supplier Services at Nvoicepay, a FLEETCOR company. She has over 30 years of experience in financial services and payments, including the management of teams with accounts receivable responsibilities. Before her work at Nvoicepay, she managed the vendor enrollment team and handled customer reconcilement challenges at Comdata.