How to convince suppliers to accept electronic payments
Although businesses are aware of the many benefits of ePayments, many still rely heavily on paper checks for half their payments or more.
What’s getting in the way? Supplier enablement is one of the biggest hurdles. It seems straightforward enough, but setting all your suppliers up for electronic payments is an insurmountable challenge for most accounts payable departments, leaving ePayments programs under optimised and AP people buried in paper.
The next generation of payment solutions is using technology and services to reach out to every single supplier, collect their payment information current and keep it secure, and ensure that every supplier who can be paid electronically is. With this approach, AP organisations are finding that they can get seventy five to eighty percent of their suppliers to accept payment by ACH or card. The key to getting suppliers to take electronic payments is surprisingly simple: ask.
Who else wants fast, easy money?
Why wouldn’t suppliers want to get paid electronically? Most do. Accounts receivable departments benefit from ePayments as much as AP does. Receiving and processing paper checks is labor intensive, costly and error-prone. With mail float, internal processing float and bank processing float, it takes longer to get access to the funds. Accepting ePayments cuts processing costs. It can help reduce bank fees and lockbox fees, and automate more of AR. Payments clear quickly, improving the organization’s ability to manage cash.
ACH payments are the most popular option. Any supplier with a bank account can accept them with no set up and no cost. About twenty percent of suppliers will also accept payment by card, even considering that they have to pay credit card fees. Card acceptance gives them all the convenience and benefits of ePayments, without having to share their banking information.
Many suppliers routinely accept five- and six-digit payments via credit card. They’ve done the cost benefit analysis and decided their margin is sufficient and that the convenience, and the ability to offer their customers options, is worth the cost. Fees are just a cost of doing business. Electronic payments enablement is not about strong-arming any supplier into taking card or ACH payments. There will always be some holdouts that want paper checks, but for most suppliers it’s an easy yes once you explain the options and educate them about the benefits. But you can’t educate if you don’t ask.
Unable to enable
This is an area where previous ePayment solutions have fallen short. AP isn’t well equipped to handle an ongoing supplier enablement and information management campaign. All it takes to pay by check is a name and mailing address. If you have an invoice, you probably already have that.
Proactively reaching out to suppliers to get ePayment information, and constantly keeping that information up to date, is a lot of work. And, most accounting systems don’t have a way to handle supplier payment information and keep it secure. So, many companies only make ePayments to their biggest suppliers, or to suppliers who reach out and ask.
Bank payment programs offer help with supplier enablement, but the scope of services is usually limited to the top 20 percent of suppliers. They may follow up occasionally to see if there are new suppliers, or to update information for existing suppliers, but usually that’s up to the account rep who probably has greater incentives to sell new programs.
Banks don’t really have an efficient way to do supplier enablement. Card and ACH programs are usually offered by separate divisions within the bank. Some banks don’t even offer both, so you may have to go to different banks to get both programs. What this means is that there’s no easy way to share information between programs. If a supplier updates their information, it has to be updated in both places. And if a supplier who accepts ACH suddenly starts accepting cards, there’s no easy way for the buyer to find that out.
Scalable data collection and secure storage Supplier networks in the cloud make the data collection effort a scalable. Once a supplier is set up and payment details including type of payment accepted are in the system, this information is available to every buyer who pays that supplier. As these networks grow in size, buyers will increasingly find a good number of their suppliers already in the system and ready to be paid, significantly shortening the length of the initial enablement campaign.
With cloud technology, supplier updates are pushed to all buyers in real time. AP doesn’t have to worry about keeping information up to date, or about security and compliance for financial data. Cloud providers offer better security than most individual companies can, and auditors appreciate the separation between companies and supplier data.
Stepping up to supplier enablement
Who collects all the supplier data? That’s where the services piece comes in. Switching to ePayments requires change management—you’re asking suppliers to do something different. The key to success is consistent, persistent communication.
It all starts with asking. Many suppliers get paid by check simply because they’ve never been asked what their preference is. They’re just happy to get paid. The initial effort is to send a letter asking what types of payment they accept and for the corresponding information.
That will yield some responses, but some people will set the letter aside, either because they have questions or hesitations, or just because they’re busy. This is an area where the fortune is in the follow up—by letter, by e-mail, by phone call, until someone has been reached, options have been explained, questions answered and the information is captured and recorded to the network.
Collecting payment information and keeping it up to date when you have thousands, or even just hundreds of suppliers, is a huge effort. Up until now, no one stepped in to take ownership of the services piece, and that’s been one of the major obstacles to widespread adoption of ePayments. We’ve been so close, and yet so far away. New payments providers using cloud technology and good old fashioned customer service provide a total solution that closes the gap, bringing the full benefits ePayments automation to everyone.
Sue Ellen Hodnot is a Vice President for Nvoicepay, a provider of B2B payment solutions for the enterprise.
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Pandora and IBM digitise jewellery supply chain
Pandora has overhauled its global supply chain in partnership with IBM amid an ecommerce sales boom for its hand-finished jewellery.
The company found international success offering customisable charm bracelets and other personalised jewellery though its chain of bricks and mortar retail destinations. But in 2020, as the COVID-19 outbreak forced physical stores to close, Pandora strengthened its omnichannel operations and doubled online sales.
A focus on customer experience included deploying IBM’s Sterling Order Management, increasing supply chain resiliency and safeguarding against disruption across the global value chain.
Pandora leverages IBM Sterling Order Management as the backbone it its omnichannel fulfilment, with Salesforce Commerce Cloud powering its ecommerce. Greater automation across its channels has boosted the jeweller’s sustainability credentials, IBM said, streamlining processes for more efficient delivery. It has also given in-store staff and virtual customer service representatives superior end-to-end visibility to better meet consumer needs.
Jim Cruickshank, VP of Digital Development & Retail Technology, Pandora, said the digital transformation journey has brought “digital and store technology closer together and closer to the customer”, highlighting how important the customer journey remains, even during unprecedented disruption.
"Our mission is about creating a personal experience and we've instituted massive platform changes with IBM Sterling and Salesforce to enable new digital-first capabilities that are much more individualised, localised and connected across channels and markets,” he added.
Pandora’s pivot to digital
The pandemic forced the doors closed at most of Pandora’s 2,700 retail locations. To remain competitive, it pivoted to online retail. Virtual queuing for stores and virtual product trials via augmented reality (AR) technology went someway to emulating the in-store experience and retail theatre that is the brand’s hallmark. Meanwhile digital investments in supply chain efficiency was central to delivering on consumer demand.
“Consumer behaviour has significantly shifted and will continue to evolve with businesses needing to quickly adapt to new preferences and needs,” said Kareem Yusuf, General Manager, AI Applications and Blockchain, IBM. “To address this shift, leading retailers like Pandora rely on innovation to increase their business agility by enabling and scaling sustainable supply chain operations using AI and cloud.”
Yusuf said Pandora’s success was indicative of how to remain competitive by “finding new ways to create differentiated customer experiences that protect their enterprises from disruptions to help mitigate risk and accelerate growth”.