According to the well-known saying, “Perception is reality.” People accept their beliefs as truths, which end up guiding their behavior. But what if their beliefs are based on misperceptions or myths, and they miss out on a better way to operate? That’s certainly the case with suppliers where misperceptions about electronic payments can get in the way of better practices and potential benefits.
Let’s face it, we’re all creatures of habit and we like operating the way we always have, sometimes well after the benefits have long expired. Take check payments, for example. With 81% of companies issuing checks every year according to a March 2020 PYMNTS playbook, many businesses are still clinging to this outdated payment method, despite the inefficiencies, costs, and other issues associated with it.
When you consider the effort it takes to prepare checks—from chasing down authorization signatures, to sealing, stamping, and mailing them—it quickly becomes apparent just how time-consuming and inefficient the process is. Then, when you overlay the costs for the staff to do all this, let alone the cost for paper stock, printer ink, and stamps, the case to say goodbye to checks becomes even more compelling. Checks are not beneficial to suppliers either. As companies today grapple with supply chain shortages and supplier relationships become even more important, why would you make them wait days or even a week for checks to arrive in the mail? It’s a lose-lose proposition.
The good news is that there are better ways for companies to operate. By turning to electronic payments, companies can gain tremendous efficiencies, cost savings, and visibility. The entire process is automated, so all companies need to do is to authorize payment and execute it with a tap, or a click of the mouse. If they use a payment provider, there’s even less to do, since the provider handles all the logistics involved in onboarding suppliers, handling payment inquiries, and managing payments. With automation, the costs associated with manual processing disappear, and companies can even earn rebates from making virtual card payments, which can offset the costs of automation, and in some cases, even turn AP from a cost center to a profit center. Automation also provides visibility across the payments, which not only improves the processes, but also enables companies to use the data to better manage their cash flow and supplier relationships.
6 common supplier myths about electronic payments
So, what’s involved in moving to digital? Once companies see the benefits of electronic payments and how easy it is for them to implement, most are ready to move ahead. It’s often supplier misperceptions that can be a stumbling block. By dispelling these six common supplier myths about digital payments, companies can help bring their suppliers on board to a better way of doing business:
1. The risk of fraud is high.
There’s nothing that could be further from the truth. In reality, manual, paper-based processes carry the highest risk of fraud. Companies relying on checks are extremely vulnerable to check fraud, with 74% of them experiencing actual or attempted fraud in the previous year, according to the 2020 AFP Payments Fraud and Control Survey Report, Those using digital payments fared much better, with only 33% of companies using ACH experiencing real or attempted fraud, and just 3% of those using virtual cards, which provide the added protection of randomized numbers for one-time use.
2. The lowest cost is the best way to go.
The cost to suppliers is just one factor that they should consider, and often it’s not the most important one. With suppliers’ need for cash to fund the production of goods, the speed of payment takes on greater importance. Electronic payments provide much faster payment, and, when using virtual cards, the funds are guaranteed as soon as the payment is processed. In addition, automation provides greater visibility into the status of payments, and some payment providers offer suppliers a self-service vendor portal so they can quickly check payment status from multiple buyers.
3. They have to sign up to a payment program.
When it comes to electronic payments, there is no “program” or heavy lifting that suppliers need to do. The payment provider will contact suppliers to see how they would like to be paid, and handle the enrollment and onboarding process.
4. Virtual cards are harder to use.
While the term “virtual card” might seem unfamiliar to suppliers, it is actually processed the same exact way as a credit card. The only difference is the added security that a virtual card provides to help prevent fraud. There is nothing suppliers need to do to accept it, and because they are valid for one-time use only, unlike traditional credit cards, suppliers are not responsible for securely storing card numbers for future use.
5. They need a paper trail.
Digital payments automatically create an electronic payment trail, which is easy to locate and review at a moment’s notice. In contrast, how easy is it to find a paper record buried in a file cabinet somewhere? Not at all.
6. Suppliers prefer to be paid by ACH.
Companies often assume that once a supplier agrees to be paid electronically, it will prefer ACH. That’s not necessarily the case. Virtual cards offer benefits that can make them more attractive to suppliers. In addition to providing guaranteed payment and enhanced security, virtual cards present remittance data along with payment, which enables the supplier’s Accounts Receivable department to process them quicker.
Overcoming payment myths is a win-win for suppliers and buyers
The world is moving to digital because it’s a much more effective and efficient way to conduct business. Since our actions are governed by our belief systems, it’s helpful to identify and address supplier misperceptions that can get in the way of implementing better payment practices. By educating suppliers on what electronic payments entail and how it can make their lives easier, companies not only can optimize their payment practices, but also end up with happier suppliers at a time when it is needed most.