4 Ways an ePayables Solution Helps Reduce the Cost of Paying Suppliers

ARTICLE - Every business wants to do more with less these days.

Paying suppliers electronically with an ePayables solution for NetSuite is one way to do that.

It’s no secret that it costs more to execute a check payment than electronic payment. The transaction processing costs associated with paper checks are more than 30 times as much as those for electronic payments, warns the National Automated Clearing House Association (NACHA).

But transaction processing fees are just the tip of the iceberg when it comes to the cost of paying suppliers with paper checks.

Four hidden costs chip away at corporate profitability when paying suppliers with paper checks -

HIDDEN COST #1: Wasted staff time

CFOs want their finance staff focused on value-added activities such as data analysis (think: liquidity management), supplier management, and cleaning up the vendor master database. But the manual processes associated with paying suppliers using paper checks leave little time for much else.

In a traditional accounts payable environment, staff must print, sign, stuff, mail paper checks to suppliers, deal with inevitable inquiries from suppliers regarding payment status, and manually reconcile payments and supplier invoices. When staff work remotely, someone must go into the office periodically to make check payments. Some businesses physically transport checks around town for the necessary signatures.

It is no wonder that sixty-three percent (63%) of businesses cite the operational costs related to making and reconciling payments as a significant pain point, according to the Institute of Finance and Management (IOFM).

Manual processes are so onerous that most businesses must add staff as their payments volume increases. As enterprises position themselves for economic recovery, having to vet, hire, and train more staff to make check payments is the last thing they want.

HIDDEN COST #2: Missed early payment discounts

Eighty percent (80%) of suppliers are willing to exchange discounts on the amount due on an invoice in exchange for early payment, IOFM reports—the earlier the payment, the more significant the discount.

Unfortunately, it takes so long for accounts payable departments that operate in a manual environment to pay suppliers that discounts for early payment are out-of-reach. Whether it’s opening mail, keying invoice data, shuffling invoices to approvers, tracking down lost or misfiled invoices, or printing and mailing checks, every step in a manual supplier payments process takes too long.

Slow supplier payment processes are forcing businesses to leave a lot of money on the table.

The average discount that suppliers offer for early payment is 2 percent (2%), IOFM’s Procure-to-Pay (P2P) Benchmarking Study finds. However, nearly one-quarter (25%) of buyers in industries such as pharmaceuticals, biotechnology, consumer packaged goods, and high-tech consulting are securing discounts of more than 6 percent (6%) in exchange for paying suppliers before the invoice due date.

ePayables solutions accelerate payments to suppliers, opening the door to more discounts.

HIDDEN COST #3: Poor visibility into cash flow

Cash management means more in difficult times.

Businesses want to know where things stand with their payments to suppliers and their corporate spending at any time. But getting visibility into manual accounts payable processes is a tall order.

In a manual accounts payable environment, essential information is not captured, systems are fragmented, payment information is not timely, and decision-makers do not have access to critical variables. Check payments also are hard to track and difficult to reconcile. This is a big reason why 22 percent (22%) of businesses can only forecast mid-term cash flow with 5 percent (5%) accuracy, per industry benchmarks. The inability to plan for large amounts of spending can have ripple effects across the business.

Additionally, in a manual supplier payables environment, cost-center managers may not have real-time visibility into their business unit’s spending. Accounts payable leaders do not have visibility into the status of invoices and payments or the root cause of exceptions. And treasury leaders cannot easily access the data necessary to determine the optimum method and timing for paying suppliers.

ePayables solutions provide real-time visibility into payments and tight integration with an ERP.

HIDDEN COST #4: No opportunities for cash-back rebates.

Few people would pass up free money.

But that’s what businesses do when they pay suppliers with paper checks instead of virtual cards.

Businesses earn cash-back rebates on card payments made through an ePayables solution. It is not uncommon for companies to earn cash-back rebates on 30 percent (30%) of their spending. In some cases, the cash-back rebates earned by businesses can transform accounts payable into a profit center.

How to reduce your costs with ePayables for Oracle NetSuite

Wasted time, poor visibility, missed early payment discounts, and no cash-back rebates. These are some of the ways that antiquated approaches to paying suppliers cost more than you think.

An ePayables solution that is native in NetSuite – one that combines an online portal, prenotes, approvals, payments, and rich remittance detail – makes paying suppliers easy and affordable.

Want to reduce your costs to pay suppliers?

Let’s arrange a time to chat about your needs and take a tour of our ePayables solution.

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