8 Strategies For Convincing Suppliers To Accept Electronic Payments

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8 Strategies for Convincing Suppliers to Accept Electronic Payments

If you’re like most businesses, paying more suppliers electronically is on your agenda. You want to reduce the time and cost associated with paying suppliers, earn cash-back rebates, streamline the reporting and reconciliation of outbound cash and mitigate the risks of payments fraud. And you’ve likely put a strategy in place to increase the percentage of supplier payments you make electronically.

Accounts payable professionals anticipate that the percentage of business-to-business electronic payments will surpass those made via paper check within the next three years, per the Institute of Finance and Management’s (IOFM) 2018 Future of Accounts Payable report.

Unfortunately, suppliers don’t always understand or appreciate the benefits of electronic payments. Some suppliers may even view electronic payments as a negative. Unless suppliers agree to be paid electronically, you will not achieve the maximum benefit from your electronic payments initiatives.

20%: Percentage of accounts payable professionals that cite concerns about supplier adoption as their biggest obstacle to migrating to business-to-business electronic payments, IOFM finds.

 


 

Abandoning your electronic payments initiatives is not the answer to this problem. Instead, it’s about convincing suppliers to be paid electronically. Here are eight strategies for winning over suppliers:

 

  1. Look for low-hanging fruit: IOFM reports that 61 percent of supplier payments are made electronically.  That means the chances are good that many of your suppliers already accept electronic payments. A payments solutions provider such as Finexio can review your database of active suppliers to identify those that accept electronic payments, and the amount of spend that they represent. Analyzing your supplier database will help focus your supplier onboarding efforts and greatly reduce the chances of overlooking suppliers that accept electronic payments.

 

  1. Plan for success: You have too much at stake to leave supplier onboarding to chance. That’s why you need to develop a plan for driving supplier adoption. Work with your payments solutions provider to lay out supplier adoption goals, rules of engagement for each supplier or supplier segment, action items, the person responsible for each action item, milestones, and a clear timeline. Key stakeholders should periodically review progress against the plan and make any adjustments.

 

  1. Get your ducks in a row: Your supplier onboarding program won’t make it past the starting line without supplier contact information. Determine the contact person for each supplier and track down their contact information, appending the information to your vendor master file. Better yet, offload the work of tracking down contact information to your payments solutions provider so your accounts payable staff can stay focused on their primary responsibilities.

 

  1. Communicate: Getting suppliers to agree to be paid electronically rests in large part on your ability to clearly explain the payment options (and associated benefits) available to suppliers. Work with your payments solutions provider to develop a plan for contacting suppliers that uses letters, e-mails, phone calls and banner ads on your supplier portal. Be sure that staff who regularly interact with suppliers understand the program and its benefits. All printed or digital communications should be branded with your corporate logo and colors, feature messaging tailored to different types of suppliers, and include contact information for a person designated to answer any questions. And don’t hesitate to give suppliers the opportunity to immediately opt into electronic programs.

 

  1. Don’t force suppliers into a corner: ‘One sizes fits all’ doesn’t apply to supplier payments. Providing suppliers with options for how they want to be paid drives adoption of electronic payments. Some electronic payments solutions offer nine payment methods. Buyers simply upload a single invoice payment file into the solution. The solution then parses the file based on how each supplier wants to be paid (even by paper check) and executes the payment.

 

  1. Let suppliers know that you have their back: Suppliers cannot afford to have their cash flow impacted by issues with their customer payments. Suppliers will be more willing to be paid electronically if they know you have dedicated project managers and ongoing support.

 

  1. Don’t stop onboarding: Business needs are constantly changing. And so are your mix of suppliers.  That’s why you will never achieve optimum supplier adoption with the one-time enrollment strategy used by many banks. A more effective approach is to choose a payments solutions provider that will work to enroll suppliers on an ongoing basis to uncover suppliers whose view of electronic payments has improved. As part of this effort, the payments solutions provider can regularly analyze your spend file to identify suppliers that were not previously targeted. And work with procurement to negotiate electronic payment acceptance for new contracts or to contact new suppliers about electronic payments early in the buying process.

 

  1. Rethink your standard payment terms: Extending standard payment terms for payments made via paper check is a strong incentive for suppliers to adopt electronic payments. Work with procurement and treasury to develop a strategy for aligning your standard payment terms to different payment types (e.g. 10-day payment terms for virtual card payments, 30-day payment terms for ACH transactions, 45-day payment terms for check payments, etc.).

 


 

Ready to Get Started?

Paying suppliers electronically offers businesses tremendous operational and strategic benefits. But businesses will never achieve the maximum benefits of electronic payments without strong supplier adoption. The eight strategies described above will help convince suppliers to be paid electronically.

If you want help creating a strategy to convince your suppliers to adopt electronic payments, let us know.