Introduction
If you still pay your vendors with paper checks, you are likely facing various problems for your business such as tons of manual effort, difficulty in tracking payments, high fees on checks, etc.
Checks are a slow process with many steps at both ends. By comparison, paying vendors online is usually pretty simple (and your vendors will appreciate having the cash directly in your bank account). With online payments transforming the business world, further accelerated by COVID-19, many vendors these days prefer online payment. You can pay providers through ACH, virtual cards, or other online payment methods, depending on your company and specific circumstances.
In this article, we’ll cover the top online provider payment methods, their benefits, and how to get started.
Pay providers with ACH
ACH (Automated Clearing House) payments are electronic funds transfers that use the ACH network to move funds between bank accounts in the United States. This payment method is widely used for direct deposit of payroll, bill payment, and business-to-business payments.
ACH payments are faster and more reliable than traditional paper checks, streamlining accounts payable processes. It is important to note that ACH is a separate network from major credit card systems such as Visa, Mastercard, and American Express.
What are ACH payments?
ACH was built on the infrastructure of early computers, long before the Internet opened up instant communication. ACH is designed in such a way that there are manual steps in the transaction process. The banks would compile the ACH transfers onto tapes once a day and send the tapes to the clearinghouse for the transfers to be distributed to the banks they need to go to.
In the United States, ACH is not controlled by the government, but by a body known as NACHA (National Association of Automated Clearing Houses) which is made up of representatives from most banks in the United States. NACHA is a self-regulatory, not-for-profit organization responsible for oversight and standard development functions for ACH transactions.
ACH Benefits
ACH payments have several benefits that make them ideal for business payments:
- Convenience – can be done online
- Significantly more profitable than checks and bank transfers
- Tracking – easy to monitor and get accurate updates
How to pay providers with ACH payments
When starting the process of making ACH payments for your organization, it is important that you familiarize yourself with some (required) regulations. These are:
- Account Information Verification – You must verify that your account information is updated with the ACH network (this can be done through your bank). You can use a validation tool offered by NACHA or a third party tool.
- NACHA Certification – This certification serves as a sign of trust for your customers, indicating that your business adheres to the rules of the ACH network.
- Guidelines for ACH on the same day – The increasing use of ACH has resulted in a same-day payment alternative (which is pretty fast as far as business payments go!).
Do you want to set up online payments to your suppliers? Book a 30-minute live demo to see how Nanonets can help your team implement end-to-end AP automation.
Pay vendors with credit card
If your business is looking for an alternative to writing checks for vendor payments, consider using credit cards online. They offer faster payments than ACH transfers and come with several benefits for businesses.
However, it’s important to note that not all of your providers can accept credit card payments, as businesses are often required to pay processing fees for these transactions. However, as more businesses move to digital processes, it is likely that most of their vendors will be able to accept credit cards.
Benefits of using credit cards
Using a line of credit can increase your purchasing power, but it’s important to always pay your credit card bill in full each month to avoid interest charges. However, credit cards can give businesses convenient access to short-term financing options.
Additionally, many business credit cards offer easy-to-use record-keeping tools through their banking portals, making bookkeeping easy. Another benefit is that businesses can earn rewards or incentives, such as airline miles or cash back, by using their credit cards. It is important to research the benefits offered by different cards to determine which is the most advantageous for your business.
Finally, using a business credit card responsibly by consistently paying bills on time can help you build your credit score, which is especially important for new businesses seeking secure financing in the future.
How to pay vendors with credit card payments
Whether you can pay your vendors with a credit card largely depends on their payment policies. In general, vendors must pay processing fees to accept credit card payments, but most businesses today are set up to accept them. If you wish to pay a provider with a credit card, you will need to set up an account or provide your credit card details in their billing software.
If a provider does not accept credit cards, you may be able to use a third-party service to make a credit card payment on your behalf. For example, some banks offer payment partners who will charge your credit card and then send a paper check to your provider. Other third-party companies may charge your credit card and then initiate an ACH payment, wire transfer, or check to the provider. However, such services usually add a processing fee on your part.
Set up seamless ACH payment and streamline your accounts payable process in seconds. Book a 30 minute live demo now.
Pay vendors with bank transfers
The term “bank transfer” can have several meanings depending on the context. Generally speaking, any electronic transfer of funds could be referred to as a wire transfer. More specifically, a wire transfer is an electronic transfer of funds from one bank or credit union to another. This is why wire transfers are sometimes called “wire transfers.” When a wire transfer involves the transfer of funds between banks in different countries, it is known as a “remittance.”
Wire transfers are often confused with ACH payments, but they are not the same. Wire transfers are usually deposited the same day, but have high fees of up to $40.
Benefits of using bank transfers
Bank transfers offer several benefits that make them the preferred option in various situations. First, they are faster than paper checks and the recipient can access the funds immediately. Also, bank transfers are considered a safer way to send money than cash, which is susceptible to theft or loss. Finally, there may be certain circumstances where the use of a bank transfer is mandatory, making it the only option available.
How to pay suppliers with bank transfers
Setting up a wire transfer requires the completion of a paper or online wire transfer authorization form. This form typically requests the following information:
- Your personal data such as name and contact information.
- The amount you want to transfer.
- Your bank routing number and account number.
- The contact and bank details of the recipient.
- Your signature to authorize the transfer and any associated fees.
Additionally, you may be required to present a valid form of identification when sending or receiving a wire transfer.
Set up seamless online payments and streamline your bill payment process in minutes. Book a 30 minute live demo now.
Pay vendors with third-party payment platforms
Modern payment solutions are not only fast and cheap, they are also easy to use and often offer a good user experience. Transferring money through them is usually very convenient, but it can have the disadvantage of unreliable networks and not be accepted everywhere.
What are third-party payment platforms?
In today’s financial services and technology market, you will find several options that will allow you to set up a virtual wallet/account that you can use to transfer money around the world. Services like Wise, Stripe, and Revolut, to name a few, are easy to use, fast, reliable, and cost-effective.
Benefits of using third-party platforms
Using these third-party platforms can have several benefits:
- They are fast and efficient; Processing times are generally much faster than checks, ACH, or wire transfers.
- They are usually not expensive – most of these service providers are venture funded companies looking to grow their user base and therefore provide these services at a discounted price compared to banks.
How to pay vendors with third-party platforms
Getting started with such platforms is usually very easy: you can go directly to their website and create your trading account in your local currency. Important information such as currency exchange rates, transaction fees, and guidance on setting up vendor accounts is clearly explained and detailed for you.
Best Practices: Automating Your Accounts Payable
Whether you choose to use ACH transfers, online credit cards, wire transfers, or any other electronic payment method, automating your accounts payable is critical to efficient business operations. By using technology instead of manual entry, you can significantly reduce the chance of errors, reduce costs, and save time for payments. Additionally, automating your AP process will streamline your operations and simplify accounting, resulting in faster and more efficient financial management.
Start paying providers online now
Nanonets offers multiple payment options to pay your vendors online, at a reasonable cost that allows you to get started with vendor payments right away. Contact us for a free trial and demo of our accounts payable automation platform, and transition to a modern payment system for your vendors today.
