Gone are the days of writing a check, stuffing it in an envelope, and sending it off to its destination, hoping it doesn’t get lost or stolen along the way.
Making payments securely and efficiently has never been easier with the onset of digital payment methods. If you’re still depending on checks, you’re losing precious time and money on every payment processed.
One way businesses are reshaping their accounts payable process is through a new form of digital payments called ePayables. Read on to learn how this new technology is changing AP as we know it, saving time and being more secure.
What are ePayables?
ePayables are a digital-only payment method that uses virtual cards, each assigned to a specific vendor. The virtual cards are connected to a bank account and will draw the funds necessary to complete the payment, but with an added layer of security.
Each virtual card has its own payment information, much like a regular credit card. The virtual card has a 16-digit credit card number and CVC used to fulfill the payment.
Think of ePayables as a bank teller for your vendors: they don’t get access to the vault; instead, they have a middleman draw the funds and hand them over to the vendor. Your information is protected and the transaction more secure.
Virtual cards vs. single-use accounts
Depending on the financial institution, ePayables may be run through a virtual card or a single-use account.
A virtual card can be used repeatedly, with funds being added and withdrawn with each payment. The 16-digit number and CVC are consistent and the card can be used until its expiry date.
A single-use account is used for just one transaction. The 16-digit number and CVC is generated for the transaction and once the payment is complete, the information is invalidated and cannot be used again.
Both will complete the ePayables process, however, businesses that make repeated payments to the same vendor may prefer a virtual card to keep the billing information consistent.
How ePayables work
The best way to understand ePayables is to see the step-by-step process used in fulfilling a transaction.
1. A virtual card is assigned to a vendor
The finance team generates a virtual card for each vendor in their accounts payable platform. The virtual card is only used for the assigned vendor; no other transactions are run through the virtual card. The virtual card doesn’t carry a balance, it only draws funds from the assigned bank account when approved by the AP team.
2. An invoice is received and reviewed
The invoice is received through your typical workflow (usually by physical mail or email). Once received, the AP team does its typical invoice processing, getting sign off from the applicable stakeholders before marking it as approved for payment.
3. The request for payment is submitted by the buyer
Payment requests are typically submitted virtually to the bank or payment platform in bulk, detailing how much funding each virtual card (and by extension, each vendor) requires. The bank processes the request, withdrawing the necessary funds from the associated bank account, and dividing it across the virtual cards.
4. Vendors receive a notice of funding
The vendor will receive a notification that the virtual card has funds added to it. At this point, the payment hasn’t been made as the vendor still needs to process the payment in their payment processor.
5. The payment is processed
Now that the funds are on the virtual card in the exact amount owed on the invoice, the vendor can process the payment. The card is charged just as a credit card would be, bringing its balance to zero. This means the vendor can’t charge anything in excess to the card.
The funds will eventually be deposited in the vendor’s bank account, completing the payment process.
An example of ePayables in action
To illustrate the process of an ePayables payment, let’s walk through an example of an ePayables workflow.
A business is invoiced by its supplier for $1,000 of inventory. Once the invoice is received, the AP team begins the review process by confirming the order was received, matching it with a purchase order, and getting approval from the inventory manager.
With the invoice approved, the AP team submits an electronic request to the bank to fund the vendor’s unique virtual card with $1,000. The bank processes the request and the funds are added to the card.
The vendor receives notice that the virtual card now holds a $1,000 balance and is ready to be processed. They process the payment exactly as they would with a credit card receiving their payment in full and bringing the virtual card balance down to zero.
When the transaction is cleared on the virtual card, the AP system logs the invoice as paid and closes out the accounts payable process.
Benefits of Using ePayables
It’s worthwhile to diversify your payment options, and these benefits give good reason to add ePayables to your arsenal.
Streamlined reconciliation process
When you’re reconciling a credit card statement, you must confirm line-by-line what each transaction is.
With ePayables, each virtual card will only have transactions for a single vendor. Each transaction is easily categorized and matched with documents, as you’ll already have information on the transaction based on just the card information alone.
Enhanced security
Vendors will only be able to process charges once the funds have been added to the virtual card. There’s less risk of a payment or payment information falling into the wrong hands or duplicate payments being processed.
Fast processing times
An ePayable payment usually deposits the funds into a vendor’s bank account within two business days. This quick turnaround time helps avoid potential late fees or missed payments.
Better cash flow management
Traditional payments mean waiting for the vendor to process the payment and then waiting again for the funds to be taken out. If you’re not careful, a change in account balance could push you into the red when a payment is finally processed.
ePayables gives you control over when the money is taken out and allows you to schedule payments based on the working capital available to you.
ePayables vs. Traditional Payment Methods
ePayables share some important traits with traditional payment methods, but they differ in ways you should be aware of.
Processing fees
Vendors pay the processing fees on an ePayables payment. The fee is the same as traditional credit card processing fees, typically ranging from 1.3% to 3.5%, depending on the payment processor.
Vendor acceptance
If the vendor you’re working with doesn’t accept credit card payments, they won’t be able to accept ePayables payments. They may prefer ACH payments or checks because the customer incurs the costs for those methods.
Vendor onboarding
Setting up ePayables involves collecting vendor information and educating them on the process. Be prepared to spend some time with each vendor setting up their accounts, the virtual card, and answering their questions.
Fraud prevention
ePayables offer improved fraud protection since a payment can only be processed once funds have been added to the virtual card. Even if the payment information falls into the wrong hands, the fraudster wouldn’t be able to use it if there are no funds on the card.
Ease of processing bulk payments
It’s easier to process bulk payments on ePayables as you can combine as many payments in a single request as needed. Even if the vendor can’t process the payment right away, the funds are waiting on the virtual card for when the vendor is ready.
Getting Started with ePayables
Getting started with ePayables isn’t complicated. In fact, you’ll be up and running through just six steps:
- Choose an ePayables provider: The bank you use may offer ePayables as part of their services. Otherwise, look for alternative banks or accounts payable payment systems that allow for ePayables
- Enroll your vendors: You’ll need to communicate with vendors about the switch and make sure they’re capable of processing virtual card payments. Get the necessary information for the vendors to be set up in your ePayables platform.
- Integrate with your systems: Connect bank accounts, accounts payable platforms, and accounting platforms to ensure a smooth transfer of data to and from the ePayables platform.
- Establish the ePayables workflow: You may want to adjust your AP workflows to make more bulk payments, schedule payments effectively, and streamline approvals.
- Train the AP staff: Take time to educate the staff on the change and field any questions they have about the swap. It’s important they know how to onboard vendors and start processing payments.
- Launch and adjust: As you get more familiar with the platform, there will be learnings that help you improve the process and benefit even more from ePayables. Touch base with the platform users regularly to hear what they’re learning.
Improve your AP process with ePayables and automation
Achieve greater efficiency and better money management with the powerful combination of BILL’s virtual cards and AP automation. Our platform is built to automate the menial tasks of invoice processing and processing payments so your teams have more time doing the high value work that truly impacts a business.
Once you’re set up, you’ll have access to virtual cards that can be connected to vendors, protecting you against fraud attempts in addition to making payment processing a breeze.
Reach out to schedule a demo and see how BILL helps its customers save time and money with automation and flexible payment methods.
