With a large portion of the workforce working from home this year, including accounts payable and accounts receivable teams, it became apparent that paper anything was a real pain. Like never before, most organizations have finally decided to favor electronic payments over checks. Yet, your organization might be missing out on an option that can make processes easier for AP and AR alike: straight-through payments (STP). Also known as buyer-initiated payments (BIP) and push payments, these solutions often remain a bit of a mystery to finance professionals who are used to traditional plastic cards and ACH being the go-to electronic methods. However, once you better understand STP, it can be a great addition to your payment strategy. Keep reading to learn more about today’s payment hurdles and how STP can help.
Payment Hurdles
We all know checks are labor intensive and costly for end-user/buying organizations (“end-users”). If you add in accounts payable (AP) staff working from home, then executing check payments is even more problematic. Suppliers face hurdles, too. If accounts receivable (AR) employees work from home, receiving checks is not easy. Work-from-home (WFH) arrangements also make it harder for an AP person to reach a supplier via phone to pay an invoice with a traditional card (e.g., P-Card). Besides, this approach is inefficient. The best solutions are rooted in electronic processes that require minimal labor. Enter straight-through payments (STP).
What are Straight-through Payments?
STP/BIP are Commercial Card solutions within the category of electronic payables (ePayables), also known as electronic accounts payable (EAP) solutions. They are designed to fit into an AP process for paying invoices. The other option within the ePayables category is Virtual Cards, such as single-use accounts, also referred to as supplier-initiated payments (SIP).
With STP/BIP, following invoice approval, AP initiates payment to the supplier through its card/EAP provider, usually by providing an electronic “payment instruction file” or similar. The approved amount might represent one invoice or multiple invoices from the supplier. Unlike other card payments, the supplier does not process a charge transaction; instead, the payment is pushed to the supplier, similar to an ACH payment, but it travels through the “card rails”—through the supplier’s merchant account to its bank account.
The typical key steps of the process for the two forms of electronic accounts payable (EAP) solutions
The Benefits
As with ACH payments, end-users control the payment timing, but STP/BIP also offers potential float. Like other Commercial Card options, the end-user pays the provider monthly instead of making payments to individual suppliers directly as invoices become due. As another potential benefit, the end-user might earn revenue share (rebate).
The advantage of STP/BIP over other Commercial Cards is that it prevents supplier errors associated with charge transactions, such as charging the wrong amount, duplicate charges, and delayed charges. In this regard, both buyers and suppliers avoid problems.
Stephen D. Cohen, SVP Business Development, Boost Payment Solutions, Inc., further explains benefits to suppliers, echoing some of the statements above. “STP is definitely resonating! We are finding that many suppliers have their AR staff members working remotely during these challenging COVID times. Their personnel often do not have access to credit card terminals and may not have a convenient way to process virtual cards. STP automates the funding and posting process, addresses PCI compliance requirements and can address cost concerns, too.”
What End-users Can Do
To expand your payment strategy, actively explore STP options. Many card issuers offer both STP and Virtual Cards. You could also work directly with a provider like Boost Payment Solutions.
Even if your organization is already using the Virtual Card form of ePayables, there is still room for STP/BIP, which suppliers might prefer over Virtual Cards due to the process ease. To maximize the appeal to suppliers (and help offset the cost of acceptance), ensure you initiate payments in less than 30 days, such as within 10 days of invoice receipt.
For more information on ePayables solutions, visit https://www.recharged-education.com/epayables.
About Boost Payment Solutions
Boost Payment Solutions is a global provider of B2B payment technologies that eliminates friction associated with the use and acceptance of commercial cards. Boost Intercept®, the company’s proprietary cloud-based platform, eliminates the need for suppliers to manually extract data from virtual card payments. No hardware or software is required. Boost’s suppliers enjoy a completely passive commercial card acceptance experience, the lowest cost of acceptance and peerless remittance data that seamlessly integrates into their ERP systems for automated reconciliation. Boost’s newest product, Dynamic Boost®, offers flexible interchange pricing based on the needs of buyers and their suppliers. Learn more at www.boostb2b.com.
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About the Author
Blog post author Lynn Larson, CPCP, launched Recharged Education in 2014. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…