The Secret to a Successful Electronic Payment Program: Supplier Adoption

December 27, 2018         By: Jessica Moran

Nearly half of all businesses still continue to pay suppliers via check. That’s baffling when you consider that the average paper check transaction costs an AP department between $3-$6 (a cost that’s several times higher than other payment types) and that 75% of organizations report attempted or actual fraud via checks.

Given the evidence that checks are not an optimal payment method, why do such old school methods persist? Why are organizations so slow to make the switch to automation?

The reluctance is less about lack of desire and more about lack of ability.

Switching to electronic payments is no easy task for organizations that are deeply embedded in well established, paper-based processes, regardless of the value that could be gained from making the switch. Inertia is powerful, and it can be easier to stick with the devil you know — especially when switching would mean a lot of work for AP teams that are already overloaded.

One of the primary obstacles to switching to electronic payments is supplier onboarding.

The success of the entire electronic payment program hinges on suppliers being willing to adopt electronic payment types, otherwise the stack of checks remains.

Supplier enrollment is challenging for a number of reasons – it can cost resource-constrained AP teams a lot of time they don’t have. There’s also the security aspect of the endeavor. Collecting, managing and validating supplier bank account information presents a huge risk that AP departments are ill-equipped to handle, so many AP departments simply aren’t validating the bank account details they receive from their suppliers (typically via paper form).

But businesses don’t have to tackle this process alone. There are payables solution providers they can turn to that are designed specifically for the task of automating payment processes and managing the entire supplier enrollment portion of the process – driving automation and reducing fraud.

Here’s what supplier onboarding looks like in an ideal situation…

 

Fast tracking supplier enrollment with a business payment network

Some integrated payables providers bring established networks of accepting suppliers. This is a game-changer when it comes to driving day one results, and has become a “must-have” for many AP departments evaluating solution providers. If your business selects the right network, hundreds of thousands of suppliers will already be enrolled and accepting payments, meaning that a large portion of your suppliers can start receiving electronic payments from your business immediately, with no enrollment necessary. It’s an efficient way to hit the ground running with your electronic payment program and gain valuable momentum in the quest to convert as many transactions as possible to digital methods.

 

Supplier onboarding – an efficient (and effortless) part of a business payment network

Enrolling suppliers that are not already in the network can also be simple and straightforward. Some payment network partners will handle the entire supplier onboarding process for you. There are three key areas in which a potential supplier should be able to streamline the supplier enrollment process (and looking for a partner who offers these services should be your goal):

 

  • Which suppliers to approach

 

 

Not every supplier is a suitable candidate for electronic payments.  Suppliers paid once or twice a year, for example, represent more work than it’s worth to enroll. There may also be additional factors to consider — depending on industry.  When determining who the best candidates are for enrollment across a supplier population, a seasoned solution provider can help you make these determinations.

Your solution provider should review your payables patterns and segment your supplier list not just by size and payment amounts, but also on the suppliers’ known payment acceptance preferences across their other trading relationships in the network.

This is where the experience and longevity of a potential partner should be carefully considered. Solutions that are newer to the market simply won’t have the data available to provide insights into how common suppliers prefer to be paid, or to have built reliable predictive analytics models that gauge suppliers’ propensity to enroll in an electronic payment program on your behalf.

 

  • Selling the value of getting paid electronically

The success of your program hinges heavily on the value you provide to suppliers – and selling that value is equally important. That’s why having an experienced team of dedicated supplier enrollment specialists is so important. With the right payables solution, a campaign management team will lead the process of creating messaging that expresses the value of electronic payments to your suppliers in a way that’s compelling, which will have a significant impact on enrollment rates.

As you consider the value a potential integrated payables provider offers, ask questions about the benefits and services that they will provide to your supplier community. Do they offer choices between electronic payment types such as card and ACH? Do they provide rich remittance details in preferred formats? Does the solution offer your suppliers visibility into the status of their payments, or the ability to exchange critical documents with customers through a secure portal?

Your solution provider should work also with your business to identify additional benefits you may want to offer suppliers who agree to get paid electronically, such as faster payment timing or preferential treatment on new contract awards. All of these features and benefits combined will streamline receivables for your suppliers, help them reduce DSO, and make it that much easier to get to yes in the enrollment process.

 

  • Execution

Up to this point all of the work that’s been done has been to lay the groundwork for success — now it’s time to execute.

Anyone can pick up the phone and start making calls. To accelerate automation and financial returns, however, it’s necessary to use a more methodical approach that’s backed by science and data rather than guesswork.

 

For example, it often makes sense to use two separate enrollment teams on the campaign — one that focuses on high-spend, strategic suppliers while another calls suppliers you have a more standard relationship with. New sales and marketing technologies can help businesses of all kinds, including integrated payables providers, to get smarter about who they reach out to first and how. For example, lead-scoring tools can provide your dedicated supplier enrollment teams with prioritized call lists, helping them connect with suppliers who have the highest likelihood of enrolling first. By leveraging years of data across trading relationships and outreach processes, integrated payables providers can develop a prescriptive approach to your campaign—one that details types of communications used, number of touches, etc. Such an approach will drive significantly higher enrollment in a shorter period of time, with continually increasing returns as the predictive model enables them to incorporate learnings from their outreach (e.g. suppliers generally accepted after 2 emails and 2 phone calls) to streamline the process further.  

 

And let’s not forget about security

Wrapped around all of this is the security aspect of enrolling suppliers — this part of the process cannot be underestimated, or worse, abandoned at initial supplier sign-up and after.

Make sure to select a solution partner that is dedicated to mitigating fraud risk through every step of the process. The storage, maintenance and management of bank account data is risky to do internally and should only be handled by an experienced provider with a proven history of securing payments. At the very least you should expect a payment network partner to provide comprehensive (and ongoing) supplier business and bank account validation, user behavior monitoring and risk scoring, and multi-factor authentication.

There’s no doubt that the cost savings and efficiencies that can be gained from converting to electronic payments is worth it in both the short and long terms. But there’s also no denying the fact that the conversion process can be arduous if you aren’t equipped with the right tools and talent.

As organizations think about their 2019 plans and strategize about how to do more with less, engaging with an integrated payables provider that brings an established acceptance network and proven enrollment process should be at the top of the list. It’s a move that will have an immediate, positive impact on the business and one that will yield efficiencies, savings, and financial returns.