On the consumer side of payments, checks have been all but declared dead. However, on the commercial side, it's a vastly different story.
Despite the growing number of ePayable solutions, the commercial sector is still very much dominated by paper checks — which to many may seem to be an archaic way of doing business. But the migration from paper-based payments toward electronic is finally starting to take off due to innovations across the ePayables industry that is paving the way to modernize B2B payments in a way that saves time for the buyer and money for suppliers.
A report written by Melissa Moss, TSYS product development manager, titled “Shifting Perspective: Three Best Practices for Growing Your ePayables Program by Increasing Supplier Acceptance,” explores the value ePayables can bring to corporate buyers and their suppliers, and offers suggestions for increasing supplier acceptance of ePayables.
The paper cites a recent RPMG survey that estimates electronic accounts payable (EAP) spending will reach $65 billion this year and is expected to rise to $110 billion by 2019. So it appears the stage is set for growth for electronic accounts payable (EAP) adoption, as spending grew in 2014 among 71 percent of companies surveyed. The respondents reported an average increase of 33 percent in EAP spending between 2014 and 2015.
With these savings for both the supplier and purchaser, along with the expected increases in spending, why is it taking so long for companies to make the shift to electronic payments? Speaking with Karen Webster on the subject, Moss explains that the ePayables movement is largely dependent on supplier acceptance.
"There is still a lot of opportunity for companies to improve supplier acceptance, which is the main reason for the success or failure of any ePayables program. We really have to focus, or shift our perspective from the buyer side to the supplier side and understand what we can do to improve this. ePayables is the fastest growing segment in the commercial industry today," Moss said.
"We're seeing a 20 percent growth rate. Some key players are even experiencing over 30 percent growth. However, there are still lots of opportunities for improvement. So where can we improve? Supplier acceptance is where we need to start."
Going back to the research, a recent survey by Ardent Partners, a supply management research firm, reported that 77 percent of the organizations surveyed said that “getting suppliers to participate” in an ePayables program remains a significant challenge in the great migration beyond paper.
There are two issues on the docket: education and knowledge. The report indicates 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.
It's all about knowing what the options are and what makes the most sense for their business. Suppliers can choose to initiate ePayments from their end, where the supplier receives the card information, or they can opt for a buyer-initiated option which works basically like an ACH payment.
"We definitely want to provide them with options," Moss said. "Offering both solutions is key to making sure you're able to capture as much of the market as possible. You don't want to limit options or you will definitely miss out on some suppliers who are willing to accept ePayments if they have multiple options."
With all the ePayable platforms in the marketplace, there shouldn't be an issue with accommodating multiple payment options, Moss said. That's where the benefits of ePayables must be presented, she noted.
"There are benefits to both sides. The buyers have benefits for offering ePayables. The suppliers have benefits for accepting ePayables. I think one of the main reasons why suppliers are not accepting as quickly as we'd like is because they don't understand all of the benefits," Moss told Webster. The most obvious include: faster payments, improved cash flow, receiving guaranteed funds, and improved buyer-supplier relationships.
"If they accept the buyers preferred payment method, then they can potentially become a preferred supplier. They may receive more business from the buyer, ”Moss said.
With regard to the costs savings related to accepting ePayables, the numbers are staggering. The RPMG research used in the report found that check-based payments, on average, cost $31 to process, far outpacing $9 for an ePayment. The costs are also reduced when you factor in the efficiencies tied to ePayments, which can include volume-based discounts and increased interchange fees.
So what does TSYS recommend to solve the gap?
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 the continued adoption of ePayables.
Best practice No. 2 focuses on educating suppliers on the benefits of ePayables: guaranteed funds, improved cash flow and ability to better comply with PCI security standards. Only 24 percent of respondents to a recent RPMG survey reported a high level of satisfaction with the state of their payables process and acceptance of ePayment solutions, case in point for building a good supplier education plan.
Best practice No. 3 is about keeping the outreach campaign simple.
"It’s important to keep any ePayables outreach simple so that suppliers can easily understand the benefits and feel compelled to enroll. An outreach campaign may include emails, letters, in-person meetings and outbound calls, with the objective of explaining the value proposition and benefits suppliers can expect, along with information on how to enroll. Experience has shown that the most effective campaigns include direct calls to suppliers complemented by email," Moss writes in the report.
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 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.
It all comes back to educating suppliers about the benefits. That, combined with the cost savings and relationship-boosting abilities with buyers, could be enough to push the ePayments needle forward on the commercial side.
"Going forward I see supplier adoption increasing. One of the reasons they would not accept ePayables in the past is because they were receiving so few requests from their buyers, but that's changing. Everyday more buyers are promoting ePayables programs, which means suppliers are receiving requests more often," Moss said.
"What you're going to see is a shift from supplier initiated payments (SIP) to buyer initiated payments (BIP) or straight through processing, because as acceptance increases, suppliers may struggle with juggling ePayments from multiple platforms. Some of those payments may come in the form of an email, text or fax and the card details have to be manually entered into their POS device. Sometime in the future we will see a shift from SIP to BIP because the payments are simply pushed into the supplier’s DDA account without any manual effort from the supplier," she concluded.