How to digitize accounts payable

Are you still making payments by check? Consider using digital forms of payment instead. You’ll save time and money—while also eliminating the risk of check fraud—by paying electronically.

A survey by the Association for Financial Professionals revealed that 65% of companies experienced payment fraud in 2022.^{Disclosure 1} Automating your business’s payments can help reduce the risk of fraud with cheaper, safer, and faster ways to move funds.

Electronic payment methods offer ways for you to optimize when, where, and how money reaches your vendors. Stretch your payables and reduce your working capital needs by making just-in-time payments.

Digitizing accounts payable processes also saves time by eliminating paperwork—and automating payments to vendors. Bills are processed and paid faster, with fewer errors from manual data entry. Digitizing options can grow with you, potentially reducing the need for additional staff even when your AP needs become more complex.

If any of your vendors don’t provide electronic payment options, let them know you’re willing to work with them to make changes. Transitioning to electronic transactions won’t happen overnight, so just take it step by step.

Make payments online.

• Send electronic payments directly to your vendors, payroll processors, and taxing agencies through the Automated Clearing House (ACH) network to avoid the costs of issuing and reconciling checks. Additional ACH fraud protection services can help curb your payment-related losses.
• Use a bill payment service to route installments by paper or electronically, depending on what the situation calls for.
• Use same-day ACH, wire transfers, or purchasing cards to make just-in-time payments, and be sure to take advantage of any early payment discounts.

Remember, it’s just as important to control the money going out as it is to speed up the money coming in. When it comes to your cash flow, electronic payments can reduce processing costs and provide precisely timed payments, allowing your business to hold on to money longer and keep working capital levels low.

Replace checks with cards.

Electronic payment methods currently dominate business and consumer billing. Today, nearly 9 in 10 Americans use some form of digital payment.^{Disclosure 2} Your organization can embrace this digital transformation as well.

• Consolidate billing and expense reporting by using business credit cards.
  
• Tighten your control over company expenses by setting limits on travel, entertainment, and other categories.
• Use purchasing cards to automate costly vendor invoice payments, control timing, and reduce exceptions. Card program management software can track payments and create efficiencies in your payables processing.

Use electronic payroll.

Using direct deposit for the payment process is a simple way to reduce the need for checks. Just like digitizing accounts payable, electronic payroll saves time and paper, plus it reduces the chances of error from manual data entry. No one wants a mistake on employee paychecks. Payroll processing solutions simplify logistics and optimize security, making transitioning to employee direct deposit easy. Direct deposit can reduce the number of checks to reconcile, protect the integrity of payroll data, ensure timely payment to employees, and provide accurate data for tax and insurance purposes.

• Implement direct deposit to reduce your check volume, save time, and lower the risk of check fraud.
  
• Upgrade your software and update your contracts with payroll processors so that payroll is automatically integrated into your financial system.
• Provide your employees with online access to payroll details, W2s, 1099s, and information about benefits.

While paper checks can be forged, electronic payments can be authenticated via two-factor authentication and encryption.

Control check fraud.

Remember the earlier statistic that 65% of organizations dealt with payment fraud attacks or attempts in 2022? Sixty-three percent of that fraudulent activity came from checks.^{Disclosure 1} Consider replacing paper checks with electronic transactions. They’re processed immediately, unlike paper checks, which means the check can’t be stolen or lost. And while paper checks can be forged, electronic payments can be authenticated via two-factor authentication and encryption.

Plus, electronic transactions provide a detailed record of each transaction, making it easy to note any suspicious activity in real time.           

Send your bank periodic (weekly or monthly) files with issued checks to match paid items against your account. Use online banking services to view exceptions and make pay/return decisions daily.

Simplify reconciliation.

• Integrate posted account transactions and balances into your accounting system to automate reconciliation.
• View archived paid check images to resolve issues with your accounts payable quickly.

Paying employees and suppliers through electronic transactions is more convenient for everyone involved. By digitizing accounts payable, you’ll have better ways to track and monitor expenses, plus controls and audit trails that protect your company against fraud.