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Rather than dealing with multiple platforms, having one payment system should streamline the process
The number of vendors a small business might work with can range from a handful to several hundred. Regardless, the larger a supplier master file becomes, the more complicated it is to manage vendor payments.
Ironically, instead of simplifying the process, the explosion in the number of financial products designed to streamline how companies pay their suppliers makes managing the process more complex and administratively burdensome. Whereas one vendor might prefer payment via ACH, another may only accept checks mailed to their bank's lockbox, while a third may ask to use a third-party portal.
Consequently, without a preferred technology solution coupled with a willingness to accept the platforms your suppliers select, paying vendors can become an arduous and costly process. Nonetheless, to maintain positive relationships, your company needs an efficient and secure method to pay for goods and services.
Aim for simplicity
Instead of paying invoices using a supplier's preferred method, the first step in reducing the inherent complexity of the process involves the selection of a single solution.
To ensure payment consolidation methods meet your company's needs, have the accounts payable team create a document detailing the features and functionality it expects from a high-performing solution. Unless it's determined that there is a benefit to creating separate files for each type of payment, the technology solution your company selects should support the submission of one that includes ACH, wire, and card payments, etc. Put differently, the more files your business must develop to drive the payment process, the larger the administrative burden it assumes.
During this phase, some companies identify convoluted processes for particular vendors that serve as a barrier to adopting a new payment platform. Instead of finding solutions to handle these exceptions, now is the time to consider standardization for all of your suppliers. While they may resist, their objections should not stand in the way of adopting a more efficient method of administering vendor payments.
Develop a robust business case
While the adoption of a new approach to vendor payments may make sense conceptually, preparing a formal business case will provide an in-depth understanding of the various benefits the change creates. Reducing administrative costs is one example. Payment platform consolidation provides your company with a unified view of its cash outflows, and therefore, the ability to create better forecasts.
Though your company benefits the most from the migration, a new platform often makes it easier for your suppliers to submit a bill, monitor its status and receive funds in a timely fashion. Migrating from paper checks to an electronic system limits the ability of your employees and suppliers to intercept and steal payments. A new platform and the digitization of payments also minimizes the threat of third-party fraud.
Sell the idea to your vendors
By abandoning a previously approved payment method in favor of a new solution, your company runs the risk of alienating its suppliers. Before rolling out the platform, set aside time to develop a cohesive communication plan that explains the reasons for the change as well as a road map detailing the migration process. Also, make sure vendors know whom to contact in the event they encounter a problem during the transition and adoption phases.
While there are a number of payment solutions for small businesses, your company doesn't need to embrace every platform that your vendors employ. Instead, by requiring the use of one you select, you'll make the payment process easier for both your company and, in many cases, your suppliers as well.