From Paper Checks To Electronic Payments: Eight Questions To Ask

Payments companies are under constant pressure, as they’re expected to produce more with fewer resources amid changing consumer preferences and tough economic conditions.

We’ve been made well aware that when it comes to payments, paper is more expensive and less efficient than its online counterpart. The Treasury Department reported that issuing a paper check for company payments costs 92 cents more than it does to issue an electronic check through direct debit. Moreover, paper checks aren’t doing much to help decrease fraud, and in fact companies using paper payments are more susceptible to attacks.

In attempt to remedy the situation, payments organizations are jumping the traditional payments ship, and are switching over their payments systems to electronic purchasing cards.

According to the 2012 Purchasing Card Benchmark Survey by RPMB Research Corporation, the purchasing card market increased in North America by 27 percent between 2009-2011. By the end of 2014, nearly 60 percent of all U.S. companies are expected to adopt an electronic accounts payable (EAP) solution to begin paying suppliers and others for products and services.

For companies interested in switching to electronic payments, the task at hand now becomes finding the EAP server that’s right for you. But before making a decision, companies should keep in mind that it’s not just their team and infrastructure they have to be worried about. It is crucial to remember that a new payments system will directly affect all of the vendors in the payments process.

PYMNTS.com caught up with David Disque, vice president of operations at CSI, to ask him what firms should be asking servers when making the switch to EAP. Disque proposes eight essential questions to ask before moving accounts payable systems from paper checks to electronic card payments.

1. Will the electronic workflow process mirror current procedures?

During the evaluation, review the step-by-step process of your payables to ensure that each step is mirrored in the electronic environment. There should be safeguards against errors, validation of all payments, and error checking tools to prevent duplicate payments. This should all be part of any service provider’s platform, especially if using any manual processes to upload payment files, such as FileZilla – whereby duplicate batch file uploads can easily occur and can therefore result in unauthorized duplicate vendor payments.

2. Does the EAP system facilitate the complete end-to-end process?

Your chosen card-based EAP solution should fully support all facets of your payment process, including accountability and tracking of payments to internal check reference numbers, along with robust reporting that includes outstanding or aging payments, declines, force postings, reconciliations and missed opportunity reporting.    Additionally, the card management platform should be fully integrated to allow management of cards referenced by check number, invoice number, vendor name and/or other key characteristics related to the payments processed in a real-time environment.

3. Are full payment details included on each invoice?

Your vendors should receive a detailed remittance for each payment, just as they currently do, and your authorized team members should have the ability to view the detailed activity online, 24/7. Ask your potential EAP provider to see a copy of what will be generated and look for all the details you currently need. EAP should not compromise any of your existing accounting, tracking or reconciliation needs.

4. Does it integrate with existing ERP and accounting systems, and how easily?

Seamless, easy, and possible are words that you will hear often. Explore those words carefully. A reputable EAP provider will welcome these questions and understand their significance to your business. If customization is not included in the EAP provider’s solutions, substantial hidden costs may surface to include extensive internal or external programming costs.  Ensure that the provider has knowledge of your existing systems, the various modules that may be needed, and a proven track record of success for other clients with similar needs.

5. Who is responsible for the vendor enablement process?

The thought of moving hundreds, or even thousands, of vendors to a new payment method is one of the primary reasons that companies remain reluctant to making the switch to EAP.  And for good reason. There’s a lot of heavy lifting involved: regular and effective communication, education, training, transitioning and data collection. Look for an EAP provider that will handle all this for you, and be sure to inquire about the costs involved. Vendor setup fees and ongoing maintenance costs are commonplace, so it’s important to understand this upfront.  

6. Can the EAP provider be trusted to work with vendors on your behalf?

Your EAP provider should act as an extension of your accounts payable team as well as fully support the vendor enablement process. Ensure they understand the importance of your vendor relationships and can nurture those through the entire adoption process. A vendor’s reluctance to accept credit card payments may be due to a lack of knowledge or understanding of the value a secure electronic card based transaction provides, especially when compared to paper check-based disbursements. When choosing an EAP provider, look for one that not only handles your payables, but also represents your brand.

7. Is this a partner you can count on for long-term success, beyond the initial sale?

Your payables will change over time, and so must your EAP solution. Look for a partner rather than a provider – a company that is genuinely interested in your success. Questions to ask include: is there dedicated account management assigned to your account? Is the assigned relationship manager someone who is intimately familiar with your account and as importantly, your industry?   How often are they there to immediately answer the phone, help you troubleshoot and conduct regular reviews with your team to help identify any missed or new growth opportunities?

8. What rebates or rewards will you receive for participation?

In many cases, companies rely on credit cards simply for the convenience they offer. Many are surprised to learn that they can also benefit financially as well.

Every credit card transaction, including those made via virtual cards, incurs a small fee for every transaction. If your company is initiating those transactions – paying hundreds if not thousands of vendors every month – inquire about the ability to benefit from this volume through a reward system.

Some EAP vendors that offer card purchasing may offer rewards in the form of points. Point rewards certainly have benefits, although they are typically accompanied by a host of restrictions, such as where you can (and cannot) use them, blackout dates and expiration dates.

In conclusion, with the accounting function at the backbone of every company, choosing the right electronic accounts payable solution is mission critical for the finance executive. The eight tips above will help ensure the transition away from paper checks to an EAP solution is a successful and efficient one.

David Disque

SVP/Director Operations for CSI Enterprises, Inc.

Mr. Disque has worked as Vice President of Operations for CSI Enterprises, Inc. since early 2001. His diverse skill set has lent to the development of key corporate payment offerings and client service initiatives for all of CSI’s business operations. In addition, Mr. Disque has been Instrumental in the development of the globalVCard paysystems for Accounts Payable which has become CSI’s growth engine in leading the company to new heights market penetration and transaction spend volumes. David’s vast experience has allowed him to deliver numerous presentations on corporate payments and electronic payables topics as well as being actively involved in the innovative programming and development of CSI’s electronic accounts payable and GlobalVCard Paysystems initiatives.