How to Pay Vendors Online: Credit Card, ACH, Wire Transfer and More

If you’re still paying your vendors with paper checks, you’re likely facing several issues for your business — a lot of manual effort, difficulty tracking payments, high fees on checks, and more.

Checks are a slow process with many steps on both ends. In comparison, paying vendors online is usually quite simple (and your vendors will appreciate having the cash directly in their bank account). With online payments transforming the business world, which was further accelerated by COVID-19, many vendors these days prefer online payment. You can pay vendors via ACH, virtual cards, or other online bill payment methods, depending on your specific business and circumstances.

According to a recent McKinsey report, a business with an annual procurement spend of €1 billion could potentially free up €14 million in cash simply by avoiding early payments. This highlights the importance of efficient vendor payment strategies for businesses of all sizes.

In this article, we’ll cover the main methods of paying vendors online, their benefits, and how to get started.

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1. Paying Vendors with Credit Cards

If your business is looking for an alternative to writing checks for vendor payments, you may consider using online credit cards. They offer faster payments than ACH transfers and come with several benefits for companies.

However, it's important to note that not all of your vendors may accept credit card payments as businesses are often required to pay processing fees for these transactions. Nevertheless, as more companies shift towards digital processes, it's likely that most of your vendors will be able to accept credit cards. You can also use virtual cards for online bill payment. These are digital credit cards that offer enhanced security and control for online transactions. Virtual cards generate unique numbers for each payment, reducing fraud risk.

Why Should You Use Credit Cards for Vendor Payments?

Using a line of credit can increase your purchasing power, but it's important to always pay your credit card bill in full each month to avoid interest charges. However, credit cards can provide businesses with convenient access to short-term financing options.

Additionally, many business credit cards offer user-friendly record-keeping tools through their banking portals, making bookkeeping easier. Another benefit is that businesses can earn rewards or incentives, such as airline miles or cash back, by using their credit cards. It's important to research the benefits offered by different cards to determine which one is most advantageous for your business.

Finally, using a business credit card responsibly by consistently paying bills on time can help build your credit rating, which is especially important for new businesses looking to secure financing in the future.

Ways to Pay Vendors Using Credit Card

Whether you can pay your vendors using a credit card largely depends on their payment policies. Generally, vendors are required to pay processing fees to accept credit card payments, but most businesses nowadays are set up to receive them. If you want to pay a vendor with a credit card, you will either need to set up an account or provide your credit card details to their invoicing software.

3 major ways to pay vendors using credit cards are:

1. Direct Payment with Supplier: Some suppliers offer credit card payment options. Use provided payment links or invoicing platforms like QuickBooks to input card details and complete transactions, ensuring policy compliance.
2. Check Credit Card Company Partnerships: Certain credit card companies collaborate with third parties to facilitate payments. Activate this feature to receive virtual account numbers for transactions, often accompanied by reward points.
3. Third-party Solutions: Utilize third-party online bill pay platforms enabling credit card payments even if the vendor doesn't directly accept cards. Despite a processing fee of around 2.5%, they offer convenience by facilitating payments via various methods. Other third-party companies can charge your credit card and then initiate an ACH payment, wire transfer, or check to the vendor. However, such services typically add a processing fee on your end.

Steps Involved in Paying Vendors Using a Credit Card

Paying vendors with a credit card is convenient and can help with cash flow and earning rewards. Here’s a quick guide:

1. Verify Vendor Acceptance

• Check with Vendor: Make sure the vendor accepts credit card payments and be aware of any fees they might charge.

2. Add Your Card to Your Account

• Use Online Portals: Log in to the vendor’s payment portal.
• Enter Card Details: Input your credit card number, expiration date, and CVV code.
• Save for Future: Save your card details if the portal allows, for quicker future payments.

3. Review & Pay

• Check Invoice: Review the invoice to ensure all details are correct.
• Choose Payment Method: Select your credit card as the payment option.
• Enter Amount: Specify the amount to be paid, making sure it matches the invoice total.
• Confirm: Double-check details and confirm the payment.

4. Receipt & Statements

• Get Confirmation: Save the email confirmation or receipt from the vendor for your records.
• Record Payment: Update your accounting records with the payment details.

5. Track and Manage Payments

• Review Statements: Regularly check your credit card statements to confirm all payments are correct.
• Dispute Errors: Contact your credit card issuer immediately if there are any unauthorized charges.
• Monitor Spending: Keep track of your credit card balance to maintain a healthy credit score.

Paying vendors with a credit card is a straightforward process that helps keep your finances organized and can even earn you rewards.

Benefits of Paying Vendors With Credit Cards

Using credit cards for vendor payments can be very advantageous:

1. Improved Cash Flow

• Extended Terms: Get extra time to pay without interest.
• Liquidity: Keeps your cash available longer.

2. Rewards and Perks

• Earn Rewards: Gain cash back, points, or travel miles.
• Special Offers: Access to exclusive discounts and deals.

3. Convenient

• Easy Payments: Simple for both one-time and recurring transactions.
• Widely Accepted: Most vendors accept credit cards.

4. Secure

• Fraud Protection: Credit card companies monitor for fraud.
• Dispute Resolution: Easier to handle disputes over incorrect charges.

5. Good Record Keeping

• Detailed Statements: Monthly statements help track expenses.
• Expense Tools: Tools to categorize and manage expenses.

2. Paying Vendors via ACH

ACH, or Automated Clearing House, serves as the USA's main electronic fund transfers to move funds between bank accounts. When opting for ACH for bill pay, funds move electronically between banks, money exits your business account and is deposited into your vendor's account via the ACH network. This payment method is widely used for direct deposit of payroll, payment of bills, and business-to-business payments.

ACH payments are faster and more dependable than traditional paper checks, thereby streamlining account payable processes. It is important to note that ACH is a separate network from major credit card systems such as Visa, Mastercard, and American Express.

What are ACH payments?

ACH was built on the infrastructure of the first computers, long before the internet opened up instant communication. ACH is designed such that there are manual steps in the transaction process. Banks would compile ACH transfers onto tapes once per day, and ship the tapes to the clearing house to have the transfers distributed to the banks they are meant to go to.

In the United States, ACH is not controlled by the government, but rather by a body known as NACHA (National Automated Clearing House Association) that is made of representatives from most banks in the US. NACHA is a non-profit organization that is self-regulating and responsible for supervisory and rule-making functions for ACH transactions.

Benefits of Paying Vendors via ACH

ACH payments have several benefits that make them ideal for business payments:

1. Cost-Effective

• Lower Fees: ACH payments are cheaper than credit card payments and wire transfers.
• Reduced Costs: Cuts down on expenses related to paper checks, like printing and mailing.

2. Efficient and Quick

• Fast Processing: ACH payment processing typically takes 1-3 business days.
• Automated: Less manual work, reducing errors.

3. Secure

• Safe Transactions: Uses encrypted channels to protect against fraud.
• Controlled Payments: Schedule payments precisely to manage cash flow better.

4. Better Cash Flow Management

• Scheduled Payments: Recurring payments make cash flow more predictable.
• Real-Time Tracking: Easily track payments in real-time.

5. Eco-Friendly

• Paperless: Helps reduce paper use, benefiting the environment.

Steps Involved in Paying Vendors via ACH

When starting the process of making ACH payments for your organization, it is important to familiarize yourself with a few (necessary) regulations. These are:

1. Verification of account information – You must verify that your account information is up to date with the ACH network (this can be done through your bank). You can use a validation tool offered by NACHA or a third-party tool.
2. NACHA certification – This certification serves as a trust signal to your customers, indicating that your business adheres to the rules of the ACH network.
3. Guidelines for same-day ACH – The rising usage of ACH has resulted in a same-day payment alternative (which is pretty fast as far as business payments are concerned!).

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3. Paying Vendors using Wire Transfers

The term "wire transfer" can have multiple meanings depending on the context. Broadly speaking, any electronic transfer of funds could be referred to as a wire transfer. More specifically, a wire transfer is an electronic transfer of funds from one bank or credit union to another. This is why wire transfers are sometimes referred to as "bank wires." When a wire transfer involves the transfer of funds between banks in different countries, it is known as a "remittance."

Wire transfers are often confused with ACH payments, but they’re not the same. Wire transfers are usually deposited on the same day but come with high fees of up to 40 dollars.

Why Wire Transfer is a Good Vendor Payment Method?

Wire transfers offer several benefits that make them a preferred choice in various situations. Firstly, they are faster than paper checks, and the recipient can access the funds right away. Additionally, wire transfers are considered a more secure way to send money than cash, which is susceptible to theft or loss. Finally, there may be certain circumstances where using a wire transfer is mandatory, making it the only option available.

Steps involved in Paying Vendors with Wire Transfers

Setting up a wire transfer requires completing a wire transfer authorization form either online or on paper. This form usually requests the following information:

• Your personal details such as name and contact information.
• The amount you intend to transfer.
• Your bank's routing number and account number.
• The contact and banking details of the recipient.
• Your signature to authorize the transfer and any associated fees.

Additionally, you may need to present a valid form of identification when sending or receiving a wire transfer.

Benefits of Paying Vendors With Wire Transfer

Wire transfers offer a fast, secure, and reliable way to pay vendors. Here are the key benefits:

1. Speed

• Quick Transactions: Often complete within the same day.
• Immediate Access: Funds are available to the vendor immediately.

2. Security

• Safe Process: Uses secure banking channels, reducing fraud risk.
• Direct Payments: Transfers money directly from your account to the vendor’s account.

3. Reliability

• Confirmed Payments: Immediate confirmation of payment.
• No Reversals: Payments can’t easily be reversed, preventing disputes.

4. International Payments

• Global Reach: Pay vendors anywhere in the world.
• Currency Handling: Banks handle currency conversion.

5. Large Transactions

• High Limits: Suitable for large amounts.
• Timely Payments: Processes large payments quickly.

6. Easy Record-Keeping

• Clear Documentation: Each transfer includes a detailed record.
• Audit Trail: Provides a clear trail for audits and compliance.

7. Trust

• Trusted Method: Well-established and respected.
• Vendor Preference: Many vendors prefer wire transfers for their speed and security.

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4. Paying Vendors Using Digital Payment Platforms

Modern payment solutions are not just fast and cheap - they're also easy to use, often provide a good user experience, and offer streamlined payment processing. Transferring money through online bill pay platforms is usually very convenient, but can come with a downside of unreliable networks, and not being accepted everywhere.

What Are Digital Payment Platforms?

In today's financial technology and services market, you will find several options that allow you to set up a seamless wallet/virtual account that you can use to transfer money across the world. Services such as Wise, Stripe and Revolut, to name a few, are easy to use, fast, reliable and cost-efficient.

Benefits of Using Digital Payment Platforms

Using these online bill pay platforms can have several benefits:

1. They are fast and efficient - usually processing times are much less than checks, ACH or bank transfers.
2. They are usually not costly - most of these service providers are venture-funded companies that are looking to grow their user base and are hence providing these services at a discounted price compared to banks.

Steps Involved Paying Vendors Online With Digital Payment Solutions

Getting started with such platforms is usually very easy - you can directly go to their website and create your business account in your local currency. Important information, such as currency exchange rates, transaction fees, and guidance on setting up vendor accounts, is clearly explained and detailed out for you.

Here's a general guide on how to use digital payment solutions:

1. Select a reputable digital payment solution that suits your business needs and budget.
2. Create an account on the chosen platform, providing necessary business information and verifying your identity.
3. Connect your bank account or other funding source to the digital payment platform.
4. Input your vendors' payment details, including their preferred payment method and account information.
5. Select the vendor, enter the payment amount, and choose the payment date.
6. Double-check all payment details before confirming the transaction.
7. Follow the platform's security protocols, which may include two-factor authentication or other verification methods.
8. Monitor the payment status through the platform's dashboard or notifications.
9. Once the payment is complete, ensure it's properly recorded in your accounting system.
10. Store digital receipts and payment confirmations for record-keeping and auditing purposes.

The steps may vary slightly depending on the specific platform you choose, but generally follow this structure. Remember to familiarize yourself with the platform's specific features and security measures.

Security Measures for Online Vendor Payments

When transitioning to online vendor payments, ensuring the security of your transactions is crucial. Here are key measures to protect your business and financial information:

1. Encryption: Look for payment platforms that use SSL/TLS encryption. You'll typically see a padlock icon in the browser's address bar when accessing these secure platforms.
2. Multi-factor Authentication (MFA): Choose solutions offering MFA and enable it in your account settings. This usually involves setting up a secondary verification method, like a mobile app or SMS code.
3. Fraud Detection Systems: Opt for payment providers with built-in fraud detection. Review their security features and ask about customizable alert settings for suspicious activities.
4. Compliance Standards: Verify that your chosen platform complies with relevant standards (PCI DSS for credit cards and NACHA for ACH). This information is often found in the provider's security or compliance pages.
5. Vendor Verification Tools: Select platforms that offer vendor verification features. Use these tools to validate vendor information before initiating payments. Some solutions may integrate with third-party verification services.
6. Regular Security Updates: Choose providers that regularly update their security measures. Enable automatic updates if available, and stay informed about new security features through your provider's communications.

Additionally, ensure that you regularly review and update your internal security protocols. Train your staff on best practices for online payments, including recognizing phishing attempts and maintaining strong passwords. Implement a system of checks and balances, such as requiring multiple approvals for large transactions. Monitor your accounts regularly for unusual activity and promptly report any suspicious transactions to your payment provider.

By combining robust technological solutions with human oversight, you can significantly reduce the risk of fraud and ensure the security of your online vendor payments.

Best Practices: Automating Your Accounts Payable

Whether you choose to use ACH transfers, online credit cards, wire transfers, or any other electronic payment method, automating your Accounts Payable is crucial for efficient business operations. By utilizing technology instead of manual entry, you can significantly reduce the potential for errors, cut costs, and save time for payments. Moreover, automating your AP process will streamline your operations and simplify bookkeeping, resulting in faster and more efficient financial management.

Many online payment solutions seamlessly integrate with popular accounting software like QuickBooks, Xero, or Sage. This integration automates data entry, reduces errors, and streamlines reconciliation. For example, when you pay a vendor through an integrated system, the transaction is automatically recorded in your accounting software, updating your accounts payable and general ledger in real time. This not only saves time but also provides more accurate, up-to-date financial reporting.

Additionally, automation can help with invoice processing by using optical character recognition (OCR) technology to extract data from invoices and match them with purchase orders. This reduces manual data entry and speeds up the approval process.

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Nanonets offers multiple payment options to pay your vendors online at a reasonable cost that allows you to get started instantly with vendor payments. Contact us for a free trial and demo of our AP automation platform, and make the transition to a modern payment system for your vendors today.

Update: Nanonets is now offering 5 free additional users on every sign-up on the platform that converts to a Pro license! Take advantage of this one-time offer, and get started with Nanonets today.

FAQs about Online Vendor Payments