Summer vacation season may still be in full swing, but many of us are already looking ahead to the fall and our end of year financial goals. Did you know your accounts payable - historically a cost center - can actually drive your organization's cost savings? By shifting from resource-intensive approaches to more efficient, effective and secure payments, your AP can move from cost center to cost saver. Here are the top five ways your accounts payable process can help reduce costs all year 'round:
1. Reduce Payment Processing Costs
Bank of America has estimated that a B2B payment made by paper check could cost between $4 to $20 per transaction, factoring in paper costs and shipping, in addition to the staff hours spent disbursing, collecting and reconciling the payment. More streamlined, less high-touch payment platforms like virtual card dramatically reduce the manual work needed to process a check - enabling your employees to work more productively - while also eliminating paper and shipping costs.
2. Reduce Fraud-Related Costs
Check fraud, theft and other payment security issues like business email compromise cost companies dearly each year. We've often discussed the most obvious fraud-protection advantage virtual card offers over other formats, the fact that each payment is made via a one-time-use, randomly generated, sixteen-digit account number. But several lesser-known features of virtual card help stop security breaches and block the costs associated with them. These include non-forwardable payment notification emails, pin-controlled payment access, controls on the amount to be processed, and Merchandise Category Code (MCC) checks.
3. Reduce Maverick Spending
If your AP process is properly consolidated, you stand to significantly reduce costs associated with employees making less prudent purchases (via p-card or expense account) or purchases with less preferred suppliers. And by minimizing the spend that occurs outside of purchasing channels and cutting "off contract" buying, your AP department can often take advantage of negotiated discounts with preferred vendors.
4. Reduce Capital Costs
One of the most brilliant aspects of an AP process like virtual card is that it actually pays organizations a rebate to use it for their payments. These rebates are significant: The more you pay, the more you get back. And if your organization is upgrading or investing in a new enterprise resource planning system for the first time, one very tangible impact of the rebate is that it can defray the purchasing cost of that ERP, while ensuring more timely, more secure and more efficient payments.
5. Reduce Overall Expenses
Of course, your rebate can offset any number of corporate expenses, not just those related to your accounts payable department. The funds are yours to do with as you see fit. In this way, virtual card represents an incredibly powerful cost-savings tool, for both for- and nonprofit organizations.
Not all of your vendors are going to accept virtual payments - for a variety of reasons, some suppliers will always prefer paper checks, distributed payment cards, ACH or wire. The optimal payment mix is 60% virtual payments, for high dollar transactions; 35% distributed card, for frequent, low dollar transactions; and 5% paper check. For companies who are relatively new to electronic payments, the typical mix is 21% virtual payments, 5% distributed card, and 74% paper check. The more you dial up your virtual card spend, the greater the potential cost savings for your organization. One way to do that is to build a stronger vendor enrollment program. (Download our plan for enhanced vendor enrollment here.)
Here's to a fantastic end of the summer and end of the year!