How to automate payment to suppliers
The supplier payment process today is completely obsolete, and that is precisely why Snab was born. This process is not broken in certain parts of the world in particular, but rather it is a common and global problem. It is true that innovation in this field of payment to suppliers or payments between companies or B2B restarted 4 or 5 years ago in the United States, and little by little this innovation is reaching other regions of the world. The problem in this sector is mainly derived from the fact that most banks have left business banking in the background, focusing most of their resources on innovating on the end consumer or B2C side.
The current process of payment to suppliers
As we said in the introductory section, the accounts payable process is totally fractured in almost every company we talk to. It is broken because anyone who makes a payment to suppliers will realize that paying an invoice takes 5 or 10 minutes. In addition, the feeling is that if the company is large enough to have accounting or ERP software, both the ERP and the bank will be totally disconnected. And the only existing connection will be an Excel export file in xml or csv formats. Something that cannot be considered a connection today in the literal sense of the word.
Currently, the supplier payment process contains several steps that we will describe below and is very tedious.
1- The client provides the supplier with a financial or administration email of the company
2- The supplier sends the invoice by email to the agreed address
3- The client receives the invoice and extracts his information manually in an Excel or inserts it into the accounting software
4- Someone in the team prepares an email every week or two and requests the necessary approvals
5- The person in charge of paying the invoices reviews the Excel of invoices pending payment to review due dates
6- The person in charge of making the payment will export an XML file from the accounting software and upload it to the bank to make a payment remittance
7- In case of not having accounting software, the person in charge of paying suppliers will go to the bank’s interface and make a bank transfer manually
8- Finally, he will proceed to sign the transfer, and send an email a few days later to confirm the satisfactory payment of the invoice
Importance of proper supplier payment management
Having efficient supplier management is a very important task today, since as a company the objective is to allocate resources to create value and dedicate the least amount of resources to manual tasks that do not generate added value. Finance staff could be spending time preparing liquidity reports, treasury reports, projections and scenarios, instead of manually entering information or sending approval emails, or manually preparing bank transfers. Also, keeping the finance team happy will increase talent retention.
Existing payment methods to suppliers
Now, what methods exist today to pay suppliers? As we have described above, the process consists of several steps. But now, how are payments executed, or what ways are there today to execute them?
Previously, payment between companies by check was more common. However, in Europe it is becoming less common. In the United States, however, about 50% of business-to-business payments still occur through bank checks, both physical and electronic. In both cases, checks can take several weeks or even a month for the funds to be received by the recipient of the check. A totally inefficient system that can sometimes even cause cash problems if you forget that there is a check in transit that will be cashed a few weeks later.
Credit Transfers or Bank Transfers:
Bank transfers, or “credit transfers” in English, are the most common payment method. It is the usual transfer that you make in the banking interface when you want to make one or several transfers, either to pay bills, to move money between accounts, or to pay your employees’ payroll.
Bank transfers involve a completely manual process. Within bank transfers, it is convenient to distinguish two different payment methods:
Manual transfer in the bank interface:
That is, you have to access the banking interface, enter your data, go to the bank transfers section, open an invoice, for example, in a parallel screen, insert the information of the receiving bank, the account number, the amount of the invoice to pay, date etc. After inserting all these fields, proceed to sign the payment. The risk of making a mistake is very high, and you also run the risk of getting confused in the bank account, in the amount, in the currency, etc. The problem of making a mistake is even worse, since canceling a transfer issued in error can take several days and sometimes there is even no way to reverse it.
Direct debit or “Debit Transfers”:
Direct debit, or “debit transfer”, as it is commonly known in English, is a very common payment method in Europe, and especially in Spain. There are many companies that authorize their suppliers and sign a domiciliation permit that allows the supplier to periodically issue a payment order in favor of the supplier. The bank, therefore, automatically, each month, for example, will withdraw the amount indicated by the provider from the customer’s bank account. This mechanism, which is widely used by small and medium-sized companies, really derives from the problem of making payments. For convenience, it has been a method that many companies have adopted and that really does not make much sense. It does not make much sense to authorize someone to withdraw money from your account when, for example, we imagine the case in which the service is poorly provided, or the merchandise has arrived in poor condition. It makes no sense to authorize someone to withdraw money from our account. The job of the financial team is to watch over the treasury of the company, and authorizing external people to withdraw money from the bank automatically and without renewed permission does not make any sense. Convenience has made this a widely used method, but the logical thing would be to have exhaustive control of all the payments of a company.
One of the main methods of making payments is cash. However, this method for payment between companies is becoming less common. It is a common collection method, although less and less, for those companies that sell to individuals, such as restaurants or stores.
Snab as an innovative method of payment to suppliers
Snab is a provider of technological solutions that, through pioneering software in the cloud, allows, among other things, to automate the entire process of accounts payable and payment to suppliers. It is a “plug & play” platform that allows companies to pay their suppliers in a few clicks, regaining full control of the accounts payable and supplier payment process. In addition, the platform provides the appropriate and necessary information on treasury at the time of payment, thus facilitating decision-making when making payments to suppliers.
Snab automates the receipt of invoices, the extraction of their data with OCR scanner technology, digitizes the approval management of said invoices through the creation of “workflows” or approval flows, and finally allows them to be paid in one click, without having to leave the platform.
Digitize your business with Snab.