How to pay vendors online: Credit card, ACH, wires and more
If you’re still paying your vendors with paper checks, you’re likely facing several issues for your business - like tons 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 payment methods, depending on your specific business and circumstances.
In this article, we’ll cover the main methods of paying vendors online, their benefits, and how to get started.
Pay vendors with ACH
ACH (Automated Clearing House) payments are electronic fund transfers that use the ACH network to move funds between bank accounts in the United States. 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 ACH payments for paying vendors
ACH payments have several benefits that make them ideal for business payments:
- Convenience - can be done online
- Significantly more cost effective than checks and wire transfers
- Tracking - easy to monitor and get accurate updates
How to pay vendors with ACH payments
When starting the process of making ACH payments for your organization, it is important to familiarize yourself with a few (necessary) regulations. These are:
- 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.
- NACHA certification – This certification serves as a trust signal to your customers, indicating that your business adheres to the rules of the ACH network.
- 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!).
Pay vendors via credit card
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.
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.
How 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 into their invoicing software.
If a vendor does not accept credit cards, you may be able to use a third-party service to make a credit card payment on your behalf. For instance, some banks offer payment partners that will charge your credit card and then send a paper check to your vendor. 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.
Set up seamless ACH payment and streamline the Accounts Payable process in seconds. Book a 30-min live demo now.
Pay vendors with 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.
How to pay 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.
Set up seamless online payments and streamline your invoice payments process in minutes. Book a 30-min live demo now.
Pay vendors with third-party payment platforms
Modern payment solutions are not just fast and cheap - they're also easy to use and often have a good user experience. Transferring money through them is usually very convenient, but can come with a downside of unreliable networks, and not being accepted everywhere.
What are third-party 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 third-party platforms
Using these third-party platforms can have several benefits:
- They are fast and efficient - usually processing times are much less than checks, ACH or bank transfers.
- 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.
How to pay vendors with third-party platforms
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.
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.
Start paying vendors online now
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.