Actionable Tips on How to Make Payments to Vendors

One of the most important aspects of running a business is proper cash flow management. Since vendor payments is one of the most frequent transactions you’ll likely make as a business owner, you need to get it right. How well you manage this task can affect your business’ financial standing and overall viability. It is important to know how to make payments to vendors.

Managing your cash is more of an art than an exact science. When receivables and payables don’t match up (perhaps due to late payments from clients), you may be unable to meet your payment schedules with vendors. The mismatch may also happen when you use cash to pay for other projects that may or may not yield further cash flow. You need to organize this to maintain financial stability.

Such short-term cash flow gaps make it difficult to pay vendors on time, which may cause affected vendors to lose trust and confidence and tarnish your business image.

Digital payment processing

Another reason for late or failed payments to vendors is outdated paper-based payment systems. Such manual payment usually results in errors (such as lost invoices, inaccurate, multiple or delayed payments, etc.)

For years, most businesses have used traditional methods of payment to pay vendors. However, the wave of digital transformation sweeping across the global marketplace is transforming most business processes, including vendor payments.

The best ways to pay your vendors today is via a digital vendor payment solution. Using tools can be one of the tips for small businesses to have operations. While it may be difficult for most businesses to transition from traditional paper methods to a digital payments process, the hassle is well worth the benefits. Still, ACH transfer, cheques, cash, and wire transfers are the generally accepted ways to pay vendors… although PayPal, ACH, Bitcoin, and other digital wallets have been gaining traction.

Best ways to pay vendors

Using ACH (Automated Clearing House) transfers means paying vendors through electronic bank-to-bank transactions. This method may take 2 -3 days (or more if there’s a public holiday). Most ACH transfers are free but if you don’t have enough funds to cover your vendor payments, the transfer won’t go through and you may be charged a fee for such failed transactions. Conversely, most credit card processors charge 1.5-3.5% for processing payments.

Wire transfers are typically used to make international transfers. While these transactions are executed on the same day they are made, banks usually charge a large fee for them.

Whether you prefer to make payments via ACH transfers, cheques, or credit/debit cards, you can use payment solutions that integrate with account payables systems that facilitate your preferred payment methods. This can reduce the workload, simply your payments workflows, and eliminate the need for an accounting team to process invoices, audit transactions, and make payments.

Leverage a cloud-based payment solution

Cloud-based vendor payment solutions are the best way to digitize paper-based payment systems. Some solutions even provide you with a way to scan and upload paper bills to build a digital record of previous payments. Vendors can send in their invoices via email and you (or your accountant) can review and pay these invoices from any device with the ability to access the cloud-based solution. This results in fast vendor payments and enables you to build better relationships with your individual and corporate vendors.

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