Funding Your Accounts Payable Automation Projects Part Two

Turn Your A/P Cost Center into a Revenue Generator!

As a follow on to my last post, Funding Your Accounts Payable Automation Projects, which discussed the use of virtual card technology to earn rebates, I thought it would be useful to offer an example of revenue potential.

A corporation that prints and mails (5,000) checks per month at a cost of $1.50 per check is spending $90,000 per year to pay invoices by check.

By migrating just 25% of those checks (with an average check value of $1100) to a virtual card program that corporation can save $1,875 per month in check fees while earning more than $17,000 ($17,188) per month in rebates.  Over the course of one year, this rebate translates to more than $206,000. ($206,256).

So why would a vendor consider a card payment?  It’s a great question and one that I hear often. First, they value their relationship with you as a customer and may be willing to accommodate your preferred method of payment.  Second, they may already be accepting invoice payments via card.  Third, they are looking to reduce their lockbox fees.  And lastly, they may be selling a high margin product and have made the cost/benefit tradeoff to absorb the interchange fees.

It’s a niche opportunity – not all of your vendors will accept card payments. Analyzing the opportunity on a vendor-by-vendor basis is important. In fact, vendor adoption of card payments averages between 15-30% which is why you will need to do a vendor spend file analysis with your provider.  A 15-30% adoption rate for card payments still leaves 70-85% who are candidates for other forms of electronic payment.  But the good news is that the rebates generated from the payments made to that 15-30% of your vendors more than offset the cost of the remaining checks and other electronic payment options.

What do you think about using card rebates to fund A/P automation projects?