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Maximizing Supplier Participation in Your ePayables Program: The Importance of Multiple Payment Methods

By Matthew Carlson, Director of Business Development, Inworks

Portland, Ore, March 26, 2014

For many years, we’ve heard that electronic payments (ePayables) will soon make paper checks obsolete. Unfortunately, the healthcare industry has been slow in adopting the more efficient, paperless payment systems—primarily because of low supplier participation. Reluctant suppliers cite the lack of choice in ePayment delivery methods as their chief concern. Until providers can offer suppliers a broader diversity of payment methods to meet their needs, the industry will continue to rely heavily on conventional paper check processes.

Lackluster ePayables Programs

I travel around the country visiting hospitals, many of which have adopted ACH programs or Ghost Card programs. Yet I am consistently amazed at how low supplier participation is in most ePayables programs. Moreover, I am surprised that hospitals don’t realize they could, and should, be experiencing higher results.

Based on my experience, most hospital ePayables programs achieve between 8 and 12 percent supplier participation. Hospitals with relatively successful programs will boast a participation rate of 15 to 20 percent. Yet even 20 percent is a far cry from making paper checks obsolete, or creating any real improvements in accounts payable (AP) process efficiency.

The Problem: Lack of Payment Method Diversity

Why do hospitals suffer from low supplier participation and underperforming ePayables programs? The simple answer is that many hospitals focus on a single payment method in their ePayables program. Many fall into one of two traps:

1. They build an ePayables program around the Commercial Card solution offered by their treasury bank or the provider of their travel and expense cards
2. They rely on a payment services provider that solely offers ACH payments

Hospitals that rely on one or two payment methods can’t meet the varying needs of suppliers, each of whom have different receivables protocol and financial needs. Many suppliers are averse to paying the transaction fees associated with card payments, while others are more than happy to pay those fees because of the convenience card payments provide. Some suppliers object to divulging the banking information required for ACH payments, while others make such information readily available.

Offering limited payment methods can ultimately lead to the erosion of a hospital’s ePayables program, as suppliers opt-out for lack of payment method options. The hospital or its payment services provider should maintain close contact with suppliers, and be prepared to offer new payment options to accommodate changes in the suppliers' receivables protocols.

How to Increase Supplier Participation and go Paperless

The key to a successful ePayables program is listening to the needs of your suppliers, and offering a variety of electronic payment methods to meet those individual needs.

If, for example, a supplier has liquidity issues, they may be willing to accept a discount for early payment. In this case, to the hospital may do well to take advantage of supply chain financing and dynamic discounting opportunities offered by a payment services provider, to help the hospital make early payments on invoices. Early payment agreements can make participation more attractive to suppliers, in addition to generating incremental rebate revenue for the hospital—without impacting working capital.

Other suppliers may be looking to seamlessly integrate their receivables into their accounting system. If so, they may be willing to pay a transaction fee for embedded invoice data in an electronic funds transfer (EFT).

For a successful ePayables program, I recommend offering suppliers as many of these ePayment methods as possible:

  • EFT: with embedded CTX or EDI remittance information
  • Early payment: using AP financing and dynamic discounting
  • Purchase Cards: allowing staff limited purchasing power without having to submit check requests
  • Ghost Card: for suppliers whose receivables protocol requires that they store card information
  • Virtual Card: single-use cards that offer the highest level of internal controls and guard against most processing errors
  • Push Card: buyer initiated cards that push funds into the supplier’s account through the credit card network
  • Outsourced checks: allowing all checks to be processed via an automatically generated payment file

The Right Service Provider Can Make all the Difference

A qualified healthcare-specialized payment services provider can manage all supplier onboarding, meet the individual receivables protocols of suppliers, and deliver invoice-level payment management for the hospital. A provider who offers and manages multiple payment methods (including AP financing) not only enables a hospital to achieve a 100 percent paperless AP process, it can also centralize payments generated by the hospital into a single daily file. By partnering with the right payment services provider, a hospital can enjoy the efficiency of a fully automated payment process.

Contact Information

Matthew Carlson
Director of Business Development
866.986.1684
mcarlson@inworks.com