Accounts payable (AP) is how businesses manage payments to vendors, suppliers, and other external parties. It includes recording, verifying, and paying invoices for goods and services a business receives. A well-managed AP process helps maintain your business’s financial health by making sure that you pay your obligations on time and stay on budget.

For the best payables experience, there are some best practices to optimize bill processing, payment management, and vendor relationships. Here are key features and functions to look out for from your payables partner:

• Bill processing tools that can scan and digitize paper invoices, automatically extracting key information.
• An approvals system that can route payout requests to the right people for approval and track approvals.
• Vendor relationship management tools that can track vendor interactions and performance.

Payabli’s Pay Out APIs and UI offer easy-to-use tools for managing your payables program and sending payouts (payments) to your vendors and suppliers.

Payout payment methods

Payabli enables three different payout payment methods, each of which presents different opportunities for monetization:

• Mailed checks
• ACH payments
• Virtual cards

Each payout type has distinct characteristics, costs, and revenue opportunities for partners.

Mailed checks

There have always been costs associated with making payments by mailing checks: labor, paper, envelopes, postage, and so on. Because those costs aren’t assessed in the form of a separate fee, they’re easy to forget about.

When Payabli handles payments by mailed check, the partner pays a fee for the service which is similar to what you’d pay to process check mailings in-house. This fee is to cover the costs involved with the digitization of this service. Partners can then monetize this by charging either the merchant or the customer a premium for the privilege of using checks. For example, if Payabli charges a partner $2 for mailing a check, the partner can monetize this service by charging $4 to the merchant or customer. Partners can also choose to absorb the fees themselves.

ACH payments

When a vendor wants to be paid by ACH, Payabli charges the partner a fee for the ACH. Partners can pass this fee through at cost or monetize these payments by adding a markup, or they can opt to charge nothing and absorb the cost themselves. This is common in emerging markets, where partners are trying to remove incremental costs. Another partner option is to charge a monthly, all-inclusive subscription fee for ACH payments.

Virtual cards

Virtual card payments are essentially the same thing as accepting a credit card for an invoice. The vendor’s Merchant Services Provider (MSP) takes a percentage of the transaction. For example, on a $100 payment with a 1% fee, the vendor ultimately receives $99, while the MSP receives $1.

Payabli doesn’t charge partners for virtual cards. For transactions like the one described in the example above, part of the percentage comes back to Payabli, who is acting as the program manager with the issuing bank. Payabli shares that revenue with the partner. At scale, the amount a partner receives from this revenue stream can become significant. Partners often use it as a way to offset absorbing the cost of ACH and mailed check payments.

Running your payables

Payabli has two different payables programs: managed payables, and on-demand payouts. Which solution is right for you depends on your business and your goals.

Managed payables

Managed payables are a white glove service and solution that offers businesses the convenience of outsourcing their bill payment processes. With this model, a dedicated team takes charge of determining the method and timing of payments to vendors on behalf of the business.

Pros:

• Hands-off approach for businesses after the bill is approved
• Expert oversight and management that drives digital payment adoption
• Full reconciliation of all payments
• Comprehensive exceptions management
• Reduced operational burden for vendor management

Cons:

• Less control over payment timing and methods because vendor enablement is managed
• This program operates in a good funds model which requires having funds available up front (between 2 and 4 days in advance)

Considerations:

• Minimizes rejected payments risk
• Reduces credit exposure through a good funds model

On-demand payouts

With on-demand payouts, payments to vendors are made immediately, and funds collected from the merchant afterward.

Pros:

• Instant payment processing means partners and merchants are in control of payment timing
• Better cash flow optimization through the credit model with Payabli’s partner banks
• Customizable check features for enterprise clients
• Direct check printing from sender’s bank account so merchants can leverage positive pay with their banks

Cons:

• Partners and merchants must own the vendor enablement through Payabli APIs or tools
• Partners may have additional PCI scope if they want to view virtual cards details in their platform
• Partners might see lower adoption of digital payments when compared to a white glove vendor enablement service

Considerations:

• Partners need to consider the payment types available and how to manage their nuances within the program
• Merchants and partners must qualify for the credit model

Funding your payables

Before a business can pay their bills through an automated flow, the payables program needs access to funds to cover the cost of the bills. Those funds are collected before the bill is initiated (good funds model) or in parallel to the initiation (credit model). The next sections explain these models.

Good funds model

In the good funds model, payments to vendors are initiated only after the funds are verified and settled, eliminating the risk of payment failures or insufficient funds. Some key features of the good funds model are:

• Pre-verification of funds: Before any payment is initiated, the system verifies the availability of funds in the designated account to ensure that the payment can be successfully processed without any delays or complications.
• Settlement before payment: Funds are settled and confirmed in the account before the payout transaction is executed, providing assurance that the necessary funds are securely in place.

For paypoints, the good funds model could mean payments are pulled from their account 2 to 3 days in advance of the due date.

Credit model

The AP credit model helps businesses to optimize cash flow, manage working capital, and maintain strong vendor relationships while mitigating credit risk. In this model, the paypoint or organization are underwritten to determine their creditworthiness. After they’re underwritten and approved, they’re able to initiate payouts to suppliers and vendors on credit.

Some key benefits of the credit model are:

• Improved cash flow management: Businesses can preserve working capital for core operational expenses or strategic investments, optimizing working capital efficiency and financial performance.
• Relationship building with suppliers: Offering quick payments may also enable businesses to negotiate favorable terms, discounts, or incentives with suppliers, reducing procurement costs.

It’s good to know that access to the credit line is contingent upon the business’s creditworthiness and ability to meet repayment obligations. Businesses with poor credit history or limited financial resources may have challenges in getting approved for this model or may be subject to higher interest rates and more stringent terms.

The credit model is only used for issuing virtual cards (vCards).

Payables at Payabli

Payabli makes it easy to manage your accounts payable process through two key components: a one-time paypoint boarding process, followed by ongoing payout management.

Boarding paypoints

When paypoints apply for merchant services with Payabli, they go through a comprehensive underwriting process to ensure that their business meets Payabli’s standards and requirements. Here’s what you can expect:

Vendor management

Before you start issuing pay outs, you must create your vendors. You can manage vendors via the API and the UI. You can also enable vendors via Vendor Links.

Processing payouts

After a paypoint’s boarding is complete, they can issue payments (pay outs) to vendors. The payout process works like this:

Payout Calculator

Use the interactive calculator below to estimate the time between initiating a payout and when funds are available to your vendors.

Related resources

See these related resources to help you get the most out of Payabli.