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Best Practices in Payment Execution
Nearly 60% of businesses today are still using checks to make vendor payments. Why are so many not taking advantage of alternative forms of payments when there are clear strategic benefits from each? When do you use one payment type over another and what is the impact on your vendor relationships?
Let’s dive in.
An overview of your payment options
There are numerous ways you can pay your vendors including check, ACH, wire, credit card, debit card and one-time use virtual card. There are advantages and downfalls to each that you need to understand in order to make the best choice for your company.
- Check – everyone accepts this form of payment but it requires a ton of manual work from you.
- ACH – instant transmission of funds to your vendor but you need to provide your vendor with account and routing information.
- Wire – fastest way to send a payment but is expensive.
- Credit card – easy for tracking expenses but vendors accept some cards and not others.
- Debit card – direct withdrawal from your bank account but often difficult to use due to PIN entry.
- One-time use virtual card – you earn cash rebates but not everyone will accept this form of payment.
What payment type is right for you
Deciding on a payment type is truly a joint decision by you and the vendors you make payments to. When it comes to deciding, here are some considerations.
- Speed of payment – depending on the urgency and risk for late payment fees, you may want to consider payment types that are instant such as ACH or credit card.
- Security of the payment – some payment types are simply more secure than others. One-time use virtual cards ensure you control the exact charge on the card and the card is not usable afterwards.
- Kickbacks to your company – one-time use virtual cards and credit cards will often provide cash rebates to your companies for every vendor payment you make.
- Vendor preference – working with vendors, I know that some prefer one payment type over another and this should factor into your decision for ho you pay.
We recently hosted a webinar with MSDynamicsWorld on this topic. You can check out the on-demand recording here.
ABOUT THE AUTHOR
Christina Pappas is the Director of Marketing at MineralTree.
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