The commercial sector, dominated by paper checks and a rather archaic way of doing business, is migrating slowly away from paper-based payments and toward electronic transactions. One of the prime movers has been the emergence of ePayables, which helps smooth out part of the B2B payments cash flow cycle and can utilize either card-based or ACH transactions.
In a whitepaper penned by Melissa Moss, TSYS product development manager, titled “Shifting Perspective: Three Best Practices for Growing Your ePayables Program by Increasing Supplier Acceptance,” a number of key recommendations and signposts of value-added benefits tied to such technological adoption surfaced.
The stage is set for growth in electronic accounts payable (EAP) adoption. As noted in research conducted last year by RPMG Research, EAP spending grew in 2014 among 71 percent of companies, with the respondents reporting an average 33 percent jump in EAP spending between 2014 and 2015.
The vast majority — 72 percent — expected to see EAP spending grow over the next several years. The CAGR for the industry as a whole has been estimated by RPMG to be around 14 percent annually and to reach $110 billion by 2019.
Despite the growth prospects that lie ahead, the ePayables movement is largely dependent on supplier acceptance. A survey by Ardent Partners, a supply management research firm, noted that 77 percent of the organizations surveyed said that “getting suppliers to participate” in that technology shift remains a significant challenge in the great migration beyond paper.
Two issues remain — namely, education and knowledge. TSYS posited that a targeted outreach to suppliers encouraging them to accept ePayables (or virtual cards) would be of value. In addition, TSYS suggested that utilizing a third-party firm to help implement a supplier enrollment program would be a useful tool as well.
The true cost of paper-based transactions remains considerable. The RPMG research found that check-based payments, on average, cost $31 to process, far outpacing $9 for an ePayment. The cost is also lowered when factoring in the efficiencies tied to ePayments, which can include volume-based discounts and increased interchange fees.
The first of the three best practices recommended by TSYS is full corporate engagement or buy-in to encourage supplier adoption of ePayables. This includes consistent inbound and outbound messaging about the benefits of ePayables and the alignment of stakeholders, ranging from accounts payable to procurement professionals. The internal (corporate buyer) team must be fully aware of the challenges and benefits that stem from continued adoption of ePayables.
Best practice number two focuses on educating suppliers on the benefits of ePayables. The number of suppliers on a given supply chain has been on the rise, with only 24 percent of respondents to a recent RPMG survey reporting a level of satisfaction with the state of their payables process and acceptance of ePayment solutions.
To help educate their suppliers, purchasing organizations should shed light on the benefits EAP programs can bring — for example, guaranteed funds, which can help reduce collection efforts and costs.
And, of course, improved supplier cash flow and reduced administrative time and costs associated with processing paper check payments.
EPayables can also help suppliers by allowing them to provide more flexible payment terms, such as dynamic discounting. They can better comply with Payment Card Industry (PCI) standards by eliminating the need for secure card storage. According to the RMPG survey, 68 percent of the buyers who have an EAP have worked with their supplier’s bank and brand to negotiate a lower interchange rate for large ticket items. Finally, the purchasing organization should also provide realistic timelines and requirements for enrollment.
The third best practice in the TSYS strategy is to establish and maintain a simple and consistent outreach program, including communications across the supply chain, promoting an ePayables strategy. The most effective campaigns, noted TSYS, consist of direct phone calls to suppliers complimented by emails.
TSYS recommends a phased approach, breaking down the number of contacts into manageable groups — initially focusing on the top 1,000 suppliers and finally setting goals and generating reports to track the success of the campaign. Those making the calls should be well-versed on the program, the benefits and the requirements for enrollment. A third-party partner can be instrumental in carrying out a successful campaign. TSYS offers several suggestions for choosing the right partner.
No matter what role you have in the industry — financial institution, corporate buyer or supplier — the fact is that ePayables offer significant advantages over paper checks. The key to a successful program is getting everyone on board through a “smartly executed supplier onboarding program that educates suppliers with regard to the benefits of the solution and the incentives provided by the buyer.”
Click here to download the full report from TSYS to learn how.