There's this commercial from the '90s starring Jerry Seinfeld where he pulls into a gas station driving a black convertible, proceeds to gas up, over-fills past the $20 mark, feigns defeat towards the attendant only to reign victorious because he's paying with a card. The commercial closes on a voice over by Seinfeld along with Amex's then slogan, “do more" embossed on screen.
And consumers have certainly been "doing more" with their cards since then—an increased use of 400 percent between 1990 and 2015, in fact. Business use, however, has been much more restrained. In the accounts payable department, B2B card usage has only recently (2014) hit a double-digit percentage.
Which is a shame since businesses have forgone both time savings and rebate that using virtual cards enable. Paying business invoices by card is faster, simpler, safer, and cheaper for everyone involved.
Here are four reasons why your suppliers should accept invoice payments by card inspired by Silicon Valley Bank.
Created by Ryan Mason
Paying by card is faster for suppliers on several fronts.
For starters, card payment enters suppliers' bank accounts faster. Since there's no need for physical check runs, payments post automatically to bank accounts when payment is run.
The real speed in virtual card payment comes from shorter payment terms. Suppliers no longer need to deal with net terms and its ill effects on cash flow. Instead of 60- or even 30-day terms, invoice card payments can be negotiated around much shorter terms—sometimes as short as a few days.
But the real speed in accepting card payments is found in accounts receivable.
The time it takes receivable to process payment—or the time it takes payments to hit the ledger—is greatly reduced. Since suppliers' AR departments aren't chasing paper remittances and matching to corresponding invoices, payments can post faster, helping suppliers achieve better cash flow.
What's more, any reduction in AR's processing time saves money, too—but more on that later.
Checks aren't safe.
At least, they're not according to AFP's “2016 Payments Fraud and Control Survey" where 71 percent of companies reported actual or attempted check fraud.
But paying invoices by card only has a single-sided benefit, right? Not so.
Check fraud isn't an isolated event affecting only one company, rather, its ramifications cascade causing payment delays for all suppliers. The aftermath of which can delay payment to suppliers as the organization closes and opens new checking accounts.
Paying suppliers by card provides a level of protection for everyone—a card breach, then, won't delay payments to all suppliers.
Or at least it won't if card payments are proxied through a virtual or single-use card. In this case, unique card numbers are generated on a per-transaction or per-supplier basis. In cases of fraud, then, only that card number is deactivated—staving delays to all other suppliers.
Reduction in manual processing time is money saved.
Receivables can process a card payment faster and with less effort. Since they're spending less time and effort processing physical check payments, they can focus on more strategic tasks—ones that better align with streamlining operations.
Even after the overhead costs of processing a card payment, suppliers still win with faster funds availability and better cash flow. Keep in mind, however, that this situation usually applies to larger suppliers—ones operating with similar or higher revenue than your organization's.
And that's completely fine because supplier card payments are also about improving supplier relations, not just your bottom line.
Paying invoices by card is really about nurturing supplier relations. Suppliers get paid faster and can simplify their payment processing operations—which in turn reduces operating costs. Above all, it's much safer than getting paid by check.
And if along the way you're able to reap the rewards from time savings and rebates—well, then, it's a win-win.
Are you ready to do more with invoice payments?
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