Want to Pay Suppliers by Credit Card? 3 Ways to Get to “Yes”

Savvy businesses know the benefits of paying their suppliers by credit card: stronger cash flow, easier financial management and reduced overall expenses. Maybe you’d like to make the switch in your own company — but first, you need buy-in from your vendors.

While your banker can help facilitate card acceptance through a supplier enablement process, you don’t have to sit on the sidelines. Do your part by understanding how the change can help your suppliers, and use this information to get them on board.

Highlight the three key points below to drive home the potential payoffs.

1. They get their money — quickly

Though processing fees for credit card payments can be as high as 5%, you can ease suppliers’ fears by offering to shorten payment terms.

For example, instead of paying by check 60 days after invoicing, offer to pay in 14 days by card. Getting funds faster significantly boosts suppliers’ working capital and lets them use the funds immediately. With shorter payment terms, the overall value of accepting cards may offset the fees.

What’s more, your supplier will typically receive payment in 24 to 48 hours — faster than it would take to receive a paper check, or even a traditional ACH payment. Though same-day ACH payments offer a faster turnaround, there are costs to initiate these payments, and they don’t always provide the rich detail included in credit card transactions.

2. Their accounts receivable is simplified

Credit cards make it far more efficient to accept payments and reconcile accounts when compared to other forms of payment. The remittance detail provided with credit card transactions can make it faster and easier to match these payments with other records. Because the transaction data associated with card payments can also be pulled into companies’ financial systems, analysis and reporting also become easier.

Accepting credit cards can result in even greater time savings for suppliers that handle check payments manually. Opening envelopes, scanning checks, and other manual steps can eat up time and costs that could be put to better use. Survey data from the Association for Financial Professionals shows the median cost for receiving check payments is at least $1.57 per check. Accepting credit cards may allow your suppliers to focus on more strategic efforts.

3. Their payment process is safe and reliable

Paper checks are the payment type most frequently targeted for fraud: three-quarters of companies experience check fraud or attempted check fraud, according to a 2017 report from the Association for Financial Professionals. While your suppliers aren’t at risk of financial losses if fraudsters compromise your checks, they will have to wait for you to deal with the theft and repay them.

Virtual card numbers — unique, 16-digit numbers generated for specific transactions — deliver superior control, security and speed compared to more traditional forms of payment. This is because these numbers can be used only for transactions that match pre-set criteria. This helps to ensure a faster, safer payment process.

A more secure and streamlined process can strengthen the relationship between you and your suppliers. Your bank can help with credit card acceptance by reviewing your vendor list, contacting suppliers and explaining the benefits. Whether or not you use such a service, you should be able to explain to suppliers how credit card payments will pay off for them.

To learn more about supplier enablement services available via SVB’s Commercial Card program, contact me or your SVB Global Treasury and Payments Advisor.  

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Check out our series on how you can optimize your company's payments tools and processes on SVB's Payments Trends & Insights page.