Reduce Fees & Accelerate Invoices-to-Pay with Invoiced’s Vendor Pay

Published on April 30, 2024
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Getting paid for your products and services is part of running a business—and a positive part. But in a digital landscape, it frequently costs money to get paid. Whether you pass some of these costs on to your buyers or incur all payment fees yourself, nobody is happy about payment fees.

Invoiced’s new Vendor Pay feature aims to reduce payment processing fees for businesses making automated clearing house (ACH) payments between US-based buyers and sellers. A feature of Invoiced’s automated accounts receivable and accounts payable software offerings, Vendor Pay is one more accounting tool in your pocket that can accelerate vendor and supplier payments, reduce errors, and improve your bottom line.

How do processing fees impact your bottom line?

When processing payments (excluding cash), accounts receivable departments typically pay an underlying fee to the financial institutions (e.g., banks, credit card companies, online payment services) that help manage the transaction. 

The actual cost and type of fees will vary widely depending on payment medium, transaction volume, payment size, and associated risk — with eCommerce transactions considered particularly perilous. Depending on how many payments your business handles in a month, the cost difference between these various payment options can quickly increase. 

The most common payment methods are ACH, check, credit card, RTP payments and wire transfers. Granted, comparing the pricing for these channels isn’t always straightforward. For instance, most credit card companies charge flat fees and percentage costs to cover transactions. Each payment type might also incorporate other monthly charges or membership dues that must be considered. Similarly, the volume of failed payments or reversals you need to resolve each month can easily spike the price of a particular strategy.

Whether you cover or pass these costs to your customers, you’ll want to keep these fees as low as possible to remain competitive. 

What is Invoiced’s Vendor Pay functionality for invoices-to-pay?

Invoiced launched our new Vendor Pay capability to help rein in processing costs for sellers and simplify the sending and receiving of payments for buyers and sellers alike. By requiring a flat fee of $1 per invoice, Vendor Pay allows US-based sellers to use ACH payments to curtail spending on fees and improve their bottom line. 

As a very rudimentary example, imagine you own a company that sends out fifty $1,000 invoices per month: 

Payment Processing System

# of Invoices

Invoice Amount

Flat Fee Per Invoice

Percentage Fee 1.5%

Total Processing Fees

ACH Vendor Pay

50

$50,000

50 * 1 = $50

N/A

$50.00

Credit Card Company

50 

$50,000

50 * .20 = $10

50,000 *.015 = $750

$760.00

Remember that, for this example, we are using the lower averages for Credit Card processing fees. If the credit card flat fee was 30 cents per invoice and the percentage fee 3.5%, the same invoices would cost $1,765 to process, costing your business 3,430% more to receive the money it is owed simply. Over time, these costs can compound dramatically.

As another example, imagine sending just one invoice for a larger sum of money – let’s use 10k this time, the hardcoded transaction limit for Vendor Pay. 

Payment Processing System

# of Invoices

Invoice Amount

Flat Fee Per Invoice

Percentage Fee 1.5%

Total Processing Fees

ACH Vendor Pay

1

$10,000

1 * 1 = $1

N/A

$1.00

Credit Card Company

1

$10,000

1 * .20 = $0.20

10,000 *.015 = $150

$150.20

Again, this is just with the lower percentage fees; if the credit card flat fee was 30 cents per invoice and the percentage fee 3.5%, processing that single invoice would cost $350.30 vs. just $1 with Vendor Pay.

In addition to these savings, Vendor Pay businesses typically receive their payments in 4-6 business days. As a feature of our accounts receivable (A/R) and accounts payable (A/P) solutions, Vendor Pay streamlines the management and submission of ACH transactions, helping you get paid faster and with less costly fees. 

Why you should use Invoiced’s automated vendor payment system

Seller benefits

  • Perfect for businesses that operate on a subscription model or that deal with high invoice and transaction volumes: Rather than charging a processing fee based on a percentage of the overall payment, our solution only requires a flat $1 fee per ACH invoice transaction — a savings that quickly adds up. 
  • Competitive fees for failed payments: In the event of a payment failure, our corresponding charges only a $15 flat fee.
  • Increased protection: As mentioned, the Vendor Pay function features a hardcoded $10,000 transaction limit, which helps you avoid additional regulatory burdens and the increased risk of large-scale payments. In those cases when you need to accept a sum greater than $10,000 to close out an invoice, Vendor Pay can split the larger payment into multiple, smaller transactions.
  • Improved tracking: Vendor Pay creates a digital trail for each transaction, streamlining associated auditing and reporting efforts.
  • Faster payments: Use Invoiced’s automated functionalities to improve payment outcomes through Vendor Pay or any of our other Payment features

Buyer benefits

In managing your A/P efforts, Vendor Pay offers enhanced control, flexibility, and protection against fraud.  

By controlling when funds leave your bank account, you can better leverage your cash levels to bolster your credit rating, support funding initiatives, and conduct large-scale transactions. Vendor Pay relies on a push-based strategy for vendor payments that requires your active participation to initiate any transaction. This approach limits the potential of erroneous funds being sent from your accounts and lets you exert more nuanced control over payment timelines and overall cash flow. 

In terms of flexibility, you can leverage the Vendor Pay capability to establish hard payment limits that reduce your organization’s potential exposure. And if you run your business from multiple bank accounts, you can set up ten different payment sources.

Vendor Pay also creates a financial firewall that limits the exposure of your sensitive data, as sellers don’t have any access to your banking or account information. Even better, the service offers automated, real-time verification of bank credentials and routing numbers through Plaid integration, helping to ensure that your payments bypass potential fraud and errors to show up in the right account. Similarly, this feature helps to prevent payment duplication and improves the identification of billing errors that might have previously been overlooked.

How to use Vendor Pay by Invoiced

Please bear in mind that Vendor Pay is only available for organizations based in the United States—meaning that the company has a legal, operational presence there. The service only supports business-to-business (B2B) transactions; personal payments are not eligible. As previously noted, you’ll also need an active Invoiced account.

More detailed information on setting up Vendor Pay is available for those already with an Invoiced account. 

To get started for your A/R efforts:

  1. Set up your account: from within the Invoiced dashboard, activate the Vendor Pay service — note that you may need to provide additional business information before receiving payments
  2. Share payment details: provide your customers with your relevant payment details, including account or business information, and if possible, integrate Vendor Pay directly with your invoicing platform
  3. Monitor payments: as transactions are processed, you will receive corresponding notifications, including details on the payment amount and the customer
  4. Track and reconcile: from your Invoiced dashboard, monitor the status of each payment and generate regular reports for review and auditing purposes

To get started for your A/P efforts:

  1. Set up your account: from within the Invoiced dashboard, navigate to the payments section and activate the Vendor Pay service
  2. Add vendors: provide relevant business information (e.g., company name, address, payment details) and follow any verification prompts
  3. Initiate payment: identify the appropriate vendor, designate the payment amount, and confirm the transaction
  4. Track and report: monitor the status of existing transactions and generate corresponding reports from the integrated dashboard

Get the full benefit of A/R Automation with Invoiced 

Altogether, Vendor Pay offers a significant opportunity to cut processing costs as you collect funds from your customers and exert greater control as you send vendor payments to your suppliers. 

You can extend these benefits even further by joining the Invoiced network and choosing our Accounts Payable Automation and Accounts Receivable Automation software.

Our centralized workflows seamlessly move your incoming and outgoing payments through relevant processes with limited human intervention. Our automatic verification mechanisms help validate the legitimacy of every transaction, and the customizable dashboards and pre-built reporting capabilities we provide make it easy to monitor and control every dollar as it moves through your operations.

Limit errors, evade fraud, and stretch every dollar as you make informed, relevant business decisions to minimize cost and maximize cash flow. Vendor Pay and our accounting automation software offer obvious advantages. 

To see how much you can save, schedule a demo today.

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Published on April 30, 2024
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