Let’s say you want to pay a vendor for goods or services rendered. Thankfully, vendor payments can be made electronically. Let’s go over the process for paying vendors with credit cards safely.
What Is a Vendor Payment?
Let’s say a business ordered some goods or services from a supplier. That business sends a purchase order, and the supplier responds with an invoice asking for payment. When the business sends the money, they’ve made a “vendor payment.”
How Do Vendor Payments Work?
In the old days, this would require a lot of papers getting mailed back and forth. These days, there are accounts payable and accounts receivable departments in charge of cash flow, and they use software to handle money coming in and going out. Still, there are some steps to the process.
First, the invoice needs to be verified for accuracy. Then a journal entry must be logged, and the accounting team must calculate for and pay any taxes that apply.
Once approval is obtained and taxes have been paid, it’s time to make the vendor payment via the agreed-upon channel. Checks are traditional, but bank transfers, mobile payments, and even apps like PayPal and Venmo are commonly used.
What Are the Benefits of Using Online Vendor Payment Services?
By going digital for your accounts payable system, you’re giving yourself some considerable advantages. The most obvious benefit is speed. Payments don’t have to wait for physical delivery, and in many cases, can be instant. Your staff doesn’t have to make a post office or bank trip, so their time is used more efficiently.
Performing ACH vendor payments or paying vendors with credit cards through online software lets you log essential information automatically, making the documentation process faster and more accurate.
How to Set Up and Send Vendor Payments in 6 Steps
Putting in a little elbow grease now will save your business tons of headaches later.
Step 1: Choose a Company to Send Payments
Some companies specialize in vendor payments. They each have their software, and depending on which you choose, it might be easy to integrate with your current accounting suite or require some IT expertise.
Step 2: Create an Account
Creating an account will be a familiar process for the most part. You’ll have to provide your name, email address, Social Security number, business name, address, etc. You’ll have to have some deeper info, too, such as your business tax info.
Step 3: Connect Your Bank Account
Since you’ll want to send and receive funds easily, you’ll have to provide the routing number and account number for a business bank account.
Step 4: Add Bill Details
With your new payment system in place, the software will make this part of the process simple.
You can take a picture of your bill information and upload it that way. Because the software will connect with your existing database, you can select a vendor name from the list and add their account number.
Step 5: Select Payment Method
Cash or charge? It’s up to you! Some accounts receivable and payable companies offer bank transfer debits or if you prefer credit cards, you can go that route. With credit cards, your accounts payable department will have to deal with liabilities more often, but there are advantages to using credit such as rewards
Step 6: Choose Payment Delivery
The easiest methods are electronic, of course, with ACH bank transfers. If your vendor still wants a check in the mail, you can choose that too.
Benefits of Using an Online Accounts Payable Service
Does your accounts payable department like licking stamps? No? How about 100% manual entry? Still no? Sounds right. Using some manner of bill pay service, whether an app, a program locally installed on your network, or online software, makes life easier for them and ultimately you.
Pay Business Bills with Credit Cards
Let’s say you need to hold on to cash longer. Perhaps you’ve made some big purchases of new equipment on credit in December and don’t have to pay back the money until January. That can help with your end-of-year statement. Or, maybe you just need some time to pay off the vendor.
Instead of waiting around for a higher-up to give the okay, you could set up the software to give automatic approval permissions to other users. That way, your accountant, the person who can improve the company’s cash flow, can have more control and work more efficiently.
Syncing with QuickBooks
Quickbooks is the de facto standard for accounting software. You likely already have your vendor and customer information logged into Quickbooks, so integrating it with your accounts payable software is simple.
Additional Payment Options
Let’s say you want to pay multiple bills at once. You place several orders from a single vendor and don’t want to go in and pay each one separately. Or, perhaps you want to treat a single bill like multiple bills and pay in installments. The software makes this simple.
Payments Across Borders
If you don’t want to send hand-written checks to vendors abroad, your accounts payable software will let you pay businesses in other countries with international bank transfers.
Payments on the Road
If you’re a trucker, you know you’re going to be crossing over a lot of state lines. Relying on paper billing is impossible. With an accounts payable app, you can scan bills on your phone, call up an entire database of vendors, and do everything you need from anywhere you get cell service.
Embrace Software for Your Accounts Payable
Setting up electronic payment methods for your vendor payments is a massive time saver for your accounting team and will end up saving you lots of money. Plus, with online software, you can pay a vendor from anywhere in the world.
Using an electronic vendor payment service is faster, safer, easier to document, and more efficient than sending physical payments.
Create a good relationship with your vendors by paying on time and how they prefer. Set up payment plans with them if you have difficulty paying quickly.
A payment rendered to a vendor or supplier for goods or services.
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