Setting Up Automated Bill Payments
Many people use automatic payments to pay their bills and recurring services such as streaming music or movies. You give them your bank account information and authorization to withdraw funds from your bank on a regular basis.
However, this payment method is not without its risks. Follow these best practices to ensure successful payment automation:.
eSignature
There are many reasons that businesses might want to consider automating their bill payments. Maybe they’re tired of writing paper checks to vendors or just find it too time consuming and repetitive. Or perhaps they’re concerned about forgetting to pay a bill and potentially putting negative information on their credit report.
Payment automation happens when a business authorizes a bank to transfer funds to one of its vendors each month. This type of payment is commonly known as an ACH transaction. It’s the same kind of transaction that makes direct deposit paychecks possible for employees.
Another form of automate payments is through credit card payments. In this case, the customer provides their card information to a business that offers online bill payments and then chooses the date each month when the card will be charged. This type of automatic payment is often used for subscription services such as Netflix or Hulu.
Regardless of the method of payment automation being utilized, all of these processes require an eSignature to be processed. This is usually handled by a third-party platform that has robust security measures in place to protect sensitive data, including multi-factor authentication and encryption. It also focuses on compliance with regulations regarding data privacy and security for the benefit of its customers. An eSignature solution like DocuSign is widely used in the marketplace and has a suite of APIs for customization and integration.
Payment Gateways
Payment gateways are a crucial part of ecommerce and allowing customers to make automated payments. They help ensure that sensitive information stays out of a business’ systems and adheres to industry-wide security guidelines, such as PCI standards. Many payments providers offer gateway, processing and acquiring services in one, which can help businesses streamline their online payments.
A gateway is like a cash register, except it processes non-cash payments—like credit cards, PayPal, Venmo, ACH and eChecks—for online and in-person transactions. During a transaction, a customer’s credit card or bank account details are sent to a payment processor (also known as an acquirer) where they are verified and authorized. If everything goes through, funds are then transferred to a merchant account in the business’s name, where they are temporarily held until moved into the company’s bank account.
Payment gateways can vary in how they work, but all are designed to help protect a customer’s information. Some are hosted, which means that a customer is redirected away from the merchant website to the payment gateway’s hosted payment page (HPP) to enter their information.
Others are not hosted, and instead provide a seamless experience that integrates with the merchant’s website and brand. These types of gateways are generally easier and quicker to implement but can provide less control over the payment experience for customers.
Accounts Payable (AP) Management
The accounts payable department is responsible for tracking all the payments a company makes to vendors, including subscriptions like Netflix or Hulu. The AP team also verifies vendor invoices against the original purchase order to ensure accuracy and to avoid overpayment.
Unfortunately, the accounts payable process can be paper-heavy and prone to slow workflows, particularly for larger companies. In addition to the time it takes to process and review all the paperwork, there is also a risk for small errors that can add up over time.
Using an automated system helps to mitigate the risks of these errors and speeds up the approval process. This can help a business take advantage of early payment discounts, which are often offered by vendors.
In addition, automation of recurring payments can help to improve the efficiency of the accounts payable department. This can free up more time for other tasks, such as analyzing cash flow and improving the overall financial health of the company.
Automated recurring payments can be made with a variety of methods, including ACH, wire, credit card, and neobanks. However, businesses should carefully research their options to make sure they are using a trusted provider. This is important because the providers will have access to bank account information and other personal data, so they must be able to guarantee that they are keeping this data secure.
Reporting
The best payment automation providers offer reporting that provides clear insight into the results of automated payments. Getting this kind of information lets you see how your company is performing, compare it to the performance of other companies in your industry and demonstrate ROI to stakeholders. Using payment automation is important because it reduces manual work for your finance team, saves you money by eliminating the need to order paper checks or money orders and helps to protect you from overdraft fees that can happen when a client’s bank account balance runs out before a payment is deducted.
Automated payment solutions also promote prompt payments for businesses of all transaction volumes. A recent study found that companies with low invoice volume experienced on-time payments 33% of the time when using an automated system, compared to just 24% without. This is significant because late payments can have a domino effect on other processes and relationships, including accounting, procurement and supply chain.
Setting up automatic bill payments can be as simple as giving your vendors your bank account details. They can then withdraw the funds from your account on the dates specified by you – saving you the effort of writing a check or ordering cashiers’ checks each month. However, you do need to check your bank account balance regularly to ensure that you have enough funds in the account before each scheduled withdrawal.