Life beyond checks: the role of supplier information management in an AP payments program

Checks: First to the party, last to leave

Historians believe British banker Lawrence Childs invented the printed check in 1762. This invention revolutionized business to business transactions and helped launch the world into the industrial age.  Two hundred and sixty years later, the check is still a prominent means of paying for goods and services. In 2022, it was estimated 40% of B2B transactions were made by check. But as we enter a global “Age of AI”, this payment method lags more modern ones like ACH and virtual cards in security, efficiency, visibility, and flexibility.  Many businesses want to optimize their AP processes by moving away from checks toward more modern payment programs, but it’s not as easy as flipping a switch and turning off the MICR printer. They must first address a critical part of their upstream processes: the management of supplier information.

Why would a business want to change the way it pays?

Payments programs exist for several reasons. As businesses grow, so do their expenses. More expenses mean more suppliers and more invoices. That means more volume for an accounts payable team to manage, which if not controlled correctly, can  lead to even more expense growth! Paying suppliers with checks is a major cost driver for an AP department. The manual efforts required to create, print, stuff, address, stamp, and mail the checks are compounded by follow-up efforts. Does this sound familiar? “Where’s my check? It’s in the mail.” When you add in the material costs for printers, check stock, toner, envelopes, and stamps, on top of the labor effort, many businesses see check creation and processing costing over $7.00 each.

High transactional costs aren’t the only reason a business should consider more modern payment methods. Checks expose a company to higher levels of fraud risk than any other payment method. Check volumes have been steadily declining by 7.2% per year since 2018 but check fraud cases more than doubled between 2021 and 2022 according to the Financial Crimes Enforcement Network (FinCEN). The Global Head of Fraud & Claim Operations put it simply: “Use secure digital payment alternatives” to stay ahead of check crimes.

Enter AP payment programs – which streamline how businesses pay their suppliers, vendors, and contractors. Think of them as the central hub where invoices, approvals, and payments converge. They enable automated workflows, eliminating the bottlenecks of traditional AP methods.

From ACH transfers to virtual cards, AP payment programs offer flexibility. They support multiple payment types, so you’re not stuck with just checks or wire transfers. They also bring control and visibility into cash flow, allowing businesses to track payments in real time and optimize working capital. The best part? Many of these programs come with built-in reporting and compliance tools, so financial teams can stay audit-ready and pinpoint inefficiencies instantly. In essence, they are the engine behind a more efficient, secure, and scalable AP function. But there’s more to payments programs than just efficiency and security. Many  offer payment methods that help generate yield for buyers. These come in the form of early pay discounts and rebates. Virtual credit cards are great examples of yield generating payments and how the time value of money can be leveraged to setup buyers and sellers for success. A buyer and supplier may agree for payment terms to be shortened in exchange for acceptance of a virtual card. The seller receives earlier payments, and the buyer receives a rebate in the range of 0.5% – 1.5%. Suppliers also enjoy visibility into the status of payments so we can finally put an end to the “where’s my payment?” phone calls!

Your business has decided to implement a payments program

After considering the benefits of modernizing the last mile of AP, evaluating payments program providers, and implementing a solution it’s finally time to move away from checks, right? Most likely, there’s still a bit of work to do before switching payment methods. One of the reasons checks are so sticky is because the amount of information needed to issue one is so minimal. A check needs to be made out to an entity and mailed to that entity’s address. Name and address are the absolute bare minimum information when working with a supplier.

To move the bulk of those check payments over to ACH, a buyer needs to know the supplier’s bank account and routing number, at a minimum. Ideally, that account information should be validated before sending any payments to ensure that it is indeed an account belonging to the supplier. This is theoretically a simple process. But as supplier quantity grows the effort to obtain, validate, store, protect, and maintain this information compounds. Endeavoring to convert payments from check to ACH without considering the systems and processes that enable that switch will inevitably delay results and put your business case at risk.

Mastering supplier data: the key to growing your AP program

A supplier information management (SIM) system is key to enabling the success of a payments program. This technology allows for supplier self-service and often integrates directly with an AP workflow and payments program. Some providers even offer a bundled technology stack with SIM, AP, and Payments modules. But implementing technology without consideration for the associated human efforts is a common mistake. Technology cannot yet replicate the human-to-human interactions needed to drive suppliers to enroll in a portal. While a computer can dial and read a script to a vendor, trust and credibility are crucial before somebody enters sensitive information in a new system. These phone calls can become fruitful partnership conversations, driving discussions about reducing frictions around payments and dovetailing into negotiations on payment timing and methods. Using managed payment services, like those offered by Corcentric, will handle supplier information management (SIM), allowing you to scale your AP processes efficiently.

Two steps forward, no steps back

Evidence supports the migration from mailing checks to digital payment methods to find efficiencies, security benefits, and potential yield on payments. Accounts payable and procurement teams should be wary of implementing a payments program without a supplier information management plan: For enrolling suppliers and securely capturing supplier data. Improving supplier information management and payments systems and processes simultaneously is a common strategic approach that must be considered when shopping for payments solutions.  There are several supplier portals in the marketplace that can be paired with a payment solution.  Better yet, some payments providers offer a supplier management capability within the same platform.  Of course, the hardest part of enrolling suppliers in getting them to fill out the form and validate the information – so for organizations without a shared services capability, it might be best to look at providers that have a managed service offering as well.