Paying Vendors in the COVID-19 era and beyond: Benefits of EFTs

 

By Beth Mongold

April 27, 2020

                     

If you still pay a majority of your vendors via paper check, you and your AP team have probably had to contend with awkward new practices – perhaps only one staff member at a time can trek to the office to deal with each week’s check run; or maybe you’re printing from a home office and have had to reconfigure all your printer network settings.

 

With COVID-19 safety measures kicking us out of our routines, now is a good (or perhaps necessary) time to switch your vendors to EFTs. Even if not under ideal circumstances, this shift will serve you well even after the pandemic subsides.
 

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Benefits of paying vendors via EFT

It’s human nature to stick to what’s familiar and tangible. For AP, printing and sending check payments are both those things.

Electronic funds transfer (EFT) is a general term that defines various methods of transferring money between financial institutions. Wire transfers, credit card payments, direct deposits, and ACH payments all fall under the EFT umbrella.

 

There are many notable benefits to sending EFTs rather than checks. Here are the top three:

 
  • Less cost – no paper, printer ink, envelopes, or postage required. Fees for EFT transactions will apply, but checks are always the more expensive option - especially considering the human resources required to get checks out the door.

  • Quick processing time – electronic funds can be made available instantly or within a couple of days. This is a win for your organization and your vendors.

  • Easy to track payments – Digital trails are much easier to follow than paper trails…EFTs don’t get lost in the mail!

     



Common Challenges & Best Practices



 

Vendor onboarding

 

Asking your vendors to accept EFT payments has some challenges.

It is a time-consuming process to reach out and collect the necessary banking / remittance information, then complete the necessary set up in your ERP. Some small vendors may be very attached to check payments. You may have to spend some time educating them.

Some best practices we’ve heard from AP departments that have successfully converted a significant percentage of their vendors include:

 
  • Reach out to vendors in stages – start with the vendors you typically pay large dollar amounts, eliminating high risk check payments. Then move on to those vendors for whom you process a high volume of invoices. Convert the smaller vendors last.

  • Create a mass email campaign, requesting vendor ACH banking information. Or, the next time you mail out check payments, include an ACH banking information form and ask them to return the information. Make sure to ask for an email address so remittance information can be sent to the right person.

  • Reassure vendors that remittance information will be sent as part of the process, so they will always know how to apply payments.

  • Adjust payment terms for checks to encourage ACH enrollment – checks Net 60, EFT Net 30.


If you want to make it especially easy on your team, work with a solution provider who can take on the task of converting vendors and then handle the payments – Mekorma will soon be offering this service to AP departments that use Dynamics GP.




 

Fraud

 

While it’s true that check fraud remains the most common issue for AP, EFT fraud has become quite sophisticated. There are a variety of scams fraudsters use to divert funds – business email compromise and vendor impersonation are the more common examples.

 

Protect yourself:

 
  • If you don’t have a vendor portal where vendors can update their banking information, be sure to have controls in place when vendors submit bank changes. Send them a form that asks for the old banking information in addition to the new. And when receiving a form, contact the vendor proactively at their old phone number or email address to reconfirm that the form came from them.

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  • Require more than one approver before EFT batches can be paid.

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  • Use a separation of duties when possible – the person who creates EFT files is different from the employee who submits the file to your bank.

Setting up an approval workflow for your payments is especially important with any electronic payments since there are no paper checks to review before sending out. With a workflow, all the payments can be reviewed before they are generated by the system.



 

EFTs in Dynamics GP with Mekorma

 

Dynamics GP supports a couple varieties of EFTs: bank transfer and credit card payments. If you are a Mekorma customer yet to venture into sending EFTs, there are multiple steps in both Dynamics GP and the Payment Hub to make sure you’re set up properly.

 

You’ll need to do the following in GP:

  • Validate you are registered for EFT Payables.

  • Set up the appropriate checkbooks and vendors.

  • Configure email settings.

And for Mekorma:

  • Choose and customize an EFT remittance format.

  • Designate approvers and apply a secure workflow so you can review your payments before they are generated.

  • If using the Action Board to generate EFT files across companies, set up options based on your business rules.

You can find guidelines in our current User Guide.

As mentioned earlier, Mekorma will soon offer a solution to outsource vendor payments, providing a variety of options for your vendors. This means reduced time and effort on your part, where much of the set up and vendor maintenance would be taken care of for you. If you are interested in learning more, please let us know by filling out this form, and we’ll be in touch soon.