With everything Accounts Payable (AP) has to deal with – from coding invoices and tracking down approvals to preparing, authorizing, and executing payments – it’s no wonder that Payments-as-a-Service has become so popular. Why would any company deal with the headaches of onboarding suppliers, issuing payments, and handling inquiries and issues that crop up along the way when it can more easily outsource all of this and improve the process at the same time? For many companies, Payments-as-a-Service has become a no-brainer.
Given its popularity, many providers have jumped on the Payments-as-a-Service bandwagon, using the term to describe their services no matter how limited they may be. You can see a wide range of solutions on the market touting Payments-as-a-Service capabilities, ranging from basic check printing services to APIs for integrating payments capabilities into other systems and solutions. In my view, Payments-as-a-Service has evolved to focus on the truly value-added, managed payment services that are available today with leading AP automation solutions.
Payments-as-a-Service evolved from humble beginnings
Even in the nascent days of B2B payments, AP departments recognized that it was more efficient to outsource the function. This allowed them not only to reduce costs, speed up the process, and keep suppliers happy, but also to focus on other strategic priorities. In these early days, many relied on check printing services to pay their suppliers; yet as time went on, they realized that wasn’t enough, and Payments-as-a-Service evolved into the more comprehensive offerings now available.
Today, using these Payments-as-a-Service solutions, it is as easy to make B2B payments as it is to use the online bill pay solutions from your bank.
Making domestic and international payments easy with Payments-as-a-Service
These managed services handle all aspects of international payments for you. All you have to do is determine which suppliers you want to pay and when, and the provider handles the rest. You can pay suppliers in a variety of ways, including ACH, checks and virtual cards. Since some providers have a global network of bank accounts, making FX payments to your suppliers overseas can be just as easy as domestic payments.
Benefits of Payments-as-a-Service to buyers and suppliers alike
Comprehensive Payments-as-a Service solutions provide value to buyers and suppliers alike. For example, here are five ways it makes life easier and better for AP teams:
- You can save time. Payments-as-a-service offerings don’t just manage payment execution; they also support and strengthen the buyer-supplier relationship. The provider handles all the time-consuming administrative work, like onboarding, responding to supplier inquiries and resolving payment issues. That means you and your staff can avoid interruptions and headaches throughout the day, and have more time to focus on other financial priorities.
- Payment processing is faster. You can speed up processing time and get payments to your suppliers quicker, helping to strengthen these vital relationships.
- You can reduce costs and earn money, too. The efficiencies and time-savings you gain, alone, can help reduce departmental costs. On top of that, companies can earn money through rebates every time they pay suppliers using secure virtual cards. That means fast ROI, and for some, it allows them to cover the cost of the service or even transform AP from a cost center into a profit center.
- You have visibility across your payables. All aspects of the payment process are digitized and visible, so you can see where you are at any moment in time. Cloud-based AP automation platforms provide even greater visibility across the full invoice-to-pay lifecycle, and you can access those platforms from anywhere.
- You can help prevent fraud. Fraud is an increasing problem that can cause significant financial and reputational damage. It is estimated that check fraud costs U.S. banks and businesses approximately $50 billion annually.
Payments-as-a-Service helps reduce fraud by providing greater transparency over the process and payments, as well as an audit trail to review the transactions. Leading providers also use the latest best practices for securely collecting, validating, storing, and updating your supplier’s payment preferences. Additionally, you can increase your protection against fraud by moving more of your payments to secure ePayment methods like virtual cards. These cards which have unique numbers, and are valid for a specific dollar amount and for one-time use only.
Similarly, Payments-as-a-service provides value to suppliers. Here are four ways they can benefit:
- They can see the status of their payments. The same visibility that provides insight to buyers enables suppliers to see the status of their payments. Many providers are offering self-service portals that allow suppliers to find this information with the tap of a screen or click of a mouse. Suppliers can also view and download remittance information in the portal, to further streamline their own reconciliation process. Also, if suppliers have multiple buyers using the same service, they can see payment information from all of them, in just one place.
- Response times are faster. When questions or problems arise, suppliers can get answers quickly from a dedicated team, rather than waiting to hear back from an overworked in-house AP department, which is typically juggling other tasks.
- It can improve cash flow. Now more than ever, cash is king, and late payments can negatively impact supplier cash flow. Since Payments-as-a-Service offerings expedite processing, suppliers can avoid the delays inherent with manual processing, and benefit from faster payment.
- They can choose payment methods. Suppliers can choose how they’d like to be paid, e.g., secure virtual card, ACH, or check. More suppliers are moving away from checks today, since they take a long time for companies to prepare and send via mail, and they are more vulnerable to fraud. While suppliers do pay a fee to process card payments, they may opt for virtual cards because receiving funds is faster and easier; payment is received and guaranteed the same day the transaction is processed, while ACH usually shows up in their account the next business day. Also, with virtual card payments, suppliers can see remittance and payment information in one place, making payment reconciliation easier.
Payments-as-a-service’s is integral to the future of AP
To keep up with the fast pace of business, many AP departments are outsourcing the administrative and time-consuming tasks involved in payment and supplier management. Not only does Payments-as-a-service enable them to improve the process, and gain key visibility, but it also allows them to provide better service to their suppliers, which is more critical now than ever. It’s clear that Payments-as-a-service’s is a solution whose time has come, and it is integral to future proofing your finance team.