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Work-from-home has made B2B's checks habit untenable

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In the wake of the many changes this year has brought, companies are moving toward making more of their supplier payments electronically.

It’s a welcome thing. Check payments have dwindled in consumer life, but across U.S. industries, nearly half of all supplier payments are still made by check. As accounts payable departments went into home-office mode, it became difficult to cut checks. They rushed to set suppliers up for ACH payments, skipping over what might be a better opportunity: paying them by virtual card.

Not every supplier accepts virtual cards, however. Before you set your suppliers up for ACH, you should at least ask about cards—there are compelling benefits for both buyers and suppliers with that option. For suppliers, getting paid by card is the fastest way to get their money in the bank. On the buyer’s side, virtual cards are the most secure payment method, and they can also generate rebates. To get the promised rebates, you need to find the right card program for your business and have a solid plan for continually enabling suppliers. For most companies, it makes sense to consider virtual cards in the broader context of automating the entire payment process.

To be clear, I’m not talking about p-cards. P-cards are a physical card that AP uses to pay suppliers over the phone. Virtual cards are 16-digit “card” numbers issued to a named supplier for a specified amount. These “v-cards” can’t be processed by anyone other than the supplier, or for anything larger than the authorized amount.

And, if somehow a fraudulent transaction should occur, virtual card issuers offer the same protections as they do with plastic cards. When it comes to check and ACH payments, money that falls into fraudulent hands can be challenging to get back. Card processes are more traceable and are, therefore, easier to reverse.

It’s possible for your team to own their own card payment processes instead of handing the reins over to a payment automation partner. But the work required often dissuades companies from doing so.

One of the main reasons checks have persisted as the top payment type in the business world is the minimal setup required. This makes checks an attractive payment method on paper, especially for companies who do business with thousands of suppliers. But the actual process is more labor-intensive because each check must be approved, printed, signed, and mailed—a process that can take days for some companies.

On the reverse side, card payments require an enablement component. Someone must reach out to each supplier to confirm their payment preference. The upfront work often prevents decision-makers from pulling the trigger on implementing such a system. Ironically, many companies turn to ACH or wire as an alternate solution, but these are even costlier and more time-consuming. For these payment types, companies must collect supplier bank account information. Then they must validate and store them securely, and maintain tight, protective controls on them.

For smaller companies that are more focused on generating an additional revenue stream, a standalone virtual card program can be a decent option. The caveat is that without a strong enablement effort, any projected rebate may have to be invested back into your process to maintain it.

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B-to-B payments Payment cards Digital payments Payment processing
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