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What are the best practices for your accounts payable department? What’s the best way to manage your payments to suppliers? How do you develop an overall payment strategy? These were among the topics discussed at the TD Bank Accounts Payable Best Practices Seminar on April 29, 2014.
Richard DeSantis from VISA highlighted the use of credit and debit cards over checks as a method of value generation. A major reason is fraud reduction: checks are the number one method of fraud, and cards offer much better security. Further, buyers benefit because they can wait longer before paying suppliers, yet suppliers still benefit because collection speeds are significantly faster using cards. As Neil McHugh noted, cards are no longer a payment solution separate from checks, but rather a strategic solution that can be incorporated into the organization’s payment strategy. It’s important to be able to quantify the savings from card usage, and, as McHugh notes, “It’s all about changing culture…creating that internal culture for card usage” in the accounts payable department.
McHugh also emphasized developing a payment strategy. While there isn’t a “one size fits all” payment strategy for organizations, McHugh noted that it’s important to get the strategy and best practices down on paper, to be patient (the process can take 2-3 years), and to question the status quo. It’s important to periodically revisit old policies to ensure that they are still relevant.
Another point of discussion was managing payments to suppliers. A key strategy McHugh brought up was using leverage to encourage your suppliers to accept payments via card. One way to do this is to set “payment terms by payment types” by paying suppliers who accept cards first. This strategy may not work with all of the organization’s suppliers, but it’s a point worth pressing.
What do these best practices mean for associations? As Phil Gross noted in a recent article for TRENDS, improved supplier management can be key to maximizing cash flow, and these accounts payable and card usage best practices are an excellent way to improve supplier management in conjunction with Phil Gross’ supplier cost reduction strategies.