11 Tips for the Vendor Payment Process

If you’ve ever found yourself knee-deep in a pile of bills, invoices, and account statements, we have good news for you. There’s a much easier way to streamline your vendor payment process. In this article, we’ll explore how to craft a well-structured and organized payment process.

We’ll also discuss the Wise Business account, a seamless way for you to pay your suppliers, contractors, and freelancers in any corner of the world.

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What is a vendor payment?

Before we dive into any of the processes and tips, let’s go over what exactly a vendor payment is. When a business makes a payment to a supplier or contractor for the goods or services they receive, that’s a vendor payment. While it might sound straightforward, the actual process can become quite intricate considering all the components attached to it, such as multiple invoices, varying payment terms, constant follow-ups, and so on.

According to recent statistics, 41% of buyers saw late fees on vendor payments in 2021.² This was likely to do with challenges such as data entry errors thanks to manual and labor-intensive processes.1 These types of disruptions can cause delays and issues with supply chains, which could be bad news for businesses.

A well-crafted vendor payment process – and one that doesn’t require much manual intervention – can help you avoid these hiccups. And a smartly constructed payment process doesn’t just keep late fees at bay. It helps you improve accuracy, streamline payment cycles, and even enhance your business relationships. With such a smooth payment process, you’re presenting your business as reliable and professional, which is a win for every entrepreneur.

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9 tips for an easier vendor payment process

If you’re ready to make a move and transform your vendor's payments into a smooth operation, check out our nine tips that explore everything from leveraging technology and automation to timing international payments.

1. Create a vendor payment process

When starting the process, know that optimizing a payment process is a team effort. It’s not just about employing the accounting department – it’s about getting members from various departments involved.

Any changes or the creation of a brand new process should involve the perspectives of people who are directly and indirectly a part of vendor payment management. For example, the procurement team is a team that plays a role in establishing terms with the suppliers, while the IT team offers automation solutions for vendor payment processing.

The process should have easy-to-follow procedures and responsibilities set up at each stage, and everyone should know about the payment terms and all the other rules involved. Team members need to be well-versed in their roles and responsibilities, and regular workshops and training sessions are a good way to help get them comfortable.

Remember that crafting your payment process is not a one-time thing – it’s a dynamic process that should adapt and change as your business grows and technology develops.

2. Set up automatic or recurring payments

Having automatic or recurring payments set up is like having a well-oiled machine in motion. This way, payments get sent out on time, which means it’s unlikely that the business will have to deal with overdue payments or late fees.

As mentioned previously, automating your vendor payments means embracing digital solutions. One of these solutions is the Wise API. The Wise API integrates with your existing financial systems to make payments even easier. Once set up, it’s able to handle everything from scheduling to executing payments, whether one-time or recurring.

With the Wise API, you reduce the chances of human error and are able to manage cash flow more effectively. As the system becomes more predictable, you’ll be able to balance your outgoing payments with your cash on hand more accurately.

3. Pay vendors with batch payments

Handling vendor payments individually can be time-consuming, especially as you’ll likely be managing contracts, negotiating rates, and handling invoices all at the same time. This is where batch payments come into play, allowing for multiple payments to be bundled and processed all at once.

The batch payments process works wonders for efficiency, and with Wise Business, you aren’t just limited to domestic vendors – you can also pay multiple international vendors in different currencies by uploading just one spreadsheet. What’s even better is that Wise’s fees get cheaper when you send amounts above 100,000 GBP (the equivalent in USD), and all you need to pay is your recipient’s bank account details or email address.

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4. Paying consistently and on time? Negotiate discounts on a per-unit basis

Part of the success of your business is building relationships with vendors on trust and respect. The way to do that? Consistent, on-time payments. Just like you, vendors are running a business and depend on receiving payments on time. When you honor payment timelines, you become a valued and reliable customer to the vendor. That established trust can open doors for negotiation and potential discounts.

When vendors are confident they’ll receive payments without any delays, they might be more willing to offer per-unit discounts. Imagine you operate a bakery and purchase 1000 bags of flour every month from the same supplier. With per-unit discounts, the supplier is willing to give you a $1 discount per bag, thanks to your reliable payment history.

Initially, the supplier was charging $20 per bag of flour, which totals $20,000 per month. After the discount, you’ll be paying $19,000 each month, which means $1,000 in savings every month and $12,000 annually.

So the verdict is clear – timely payments can lead to substantial savings if you play your cards right.

5. Negotiate longer payment terms

Another thing that every business has to balance is cash flow – money in and money out. If your business purchases goods from a vendor with a payment term of 30 days, imagine how a negotiated term of 45 or even 60 days would impact your cash flow.

Longer payment terms give your business a little more breathing room. It means you can hold onto your funds for a longer time, which provides cushioning for unexpected business expenses, gives clients more time to pay, and offers opportunities to invest short-term cash.

By the time you have to pay your vendor, your business might have generated some extra income from short-term investments or customer payments, which ultimately optimizes your cash flow.

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6. Watch fees on transfers – both domestic and international

Whether you’re sending money domestically or internationally, small fees and even hidden fees can add up and put a damper on your bottom line over time. When you perform bank transfers, certain fees apply. This could be a flat transaction fee, a percentage of the transferred amount, or even both. That’s why it’s so important to choose the right payment service.

Especially with international transfers, things get even more expensive. Thanks to currency conversion rates and the typically more expensive percentages and fees, you can expect international payments to cost more than domestic ones.

Wise Business boasts transparent pricing, where you’ll always see fees upfront before you pay and only pay for what you use. For example, sending money starts at a mere 0.43%. Even better, they adopt the mid-market rate for currency conversions, making sure you get the fairest rate possible – no margins added.

7. Time your international payments for ideal conversion rates

International business presents its own challenges, and one of them is dealing with fluctuating currency exchange rates. So, not only do you have to keep an eye on the conversion rates with some services but also on how much a transaction could cost you today versus tomorrow.

Businesses should take advantage of timing to maximize their profitability, so payments can be made when you’ll get the most bang for your buck. Monitoring currency trends can sound time-consuming and complex, but with Wise’s Auto Conversions feature, it's an easy process.

The Auto Conversions feature allows you to automate your currency conversions when rates are best for you. The system will automatically watch the market for you based on your preferred exchange rate, and as soon as they meet that or exceed it, Wise will carry out the conversion. As a result, you’ll get to align with ideal conversion rates and save valuable finances along the way.

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8. Choose a bank or financial service provider with high transfer limits

If your business deals with large-sum payments a lot, transfer limits can be a frustrating roadblock. You’ll want to make sure you can easily process large amounts of money without being capped out. Some financial providers have a lower cap than others, so be sure to choose one that allows high transfer limits for the flexibility you need.

Ideally, what you need is a financial service provider that supports high transfer limits for major currencies like EUR, GBP, and USD, giving you the liberty to handle transactions without restrictions. That way, you won’t have to split payments or delay them because of transfer ceilings.

9. Find a bank or financial service provider with instant payments

Gone are the days of waiting for checks to clear or bank transfers to go through. Instant payments are the new deal, offering a high level of convenience and speed. As every second counts in the fast-paced business world, these quick, reliable transactions are the way to go.

Wise is one of the service providers that offer this. Businesses can send money instantly to over 50 countries, which means you can pay vendors without delays, no matter where they’re located. If you want to really be in the know, Wise tells you exactly when your money transfer will be completed – whether it’s in seconds or in two business days.

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10. Assess the different payment options – check if your provider has the best one for you

With digital technology, businesses are spoiled for choice when it comes to paying vendors. From traditional to modern solutions, there are a diverse array of options. But not all payment methods are created equal – there are pros, cons, and costs associated with each one.

Some vendors might prefer the conventional method of check payments, while others could be more digitally-savvy and want to accept payments via online platforms. The two factors that should play into your choice most are cost and vendor preference. Certain methods might have higher fees, while others could offer lower costs but longer processing times. Your best bet is to find a good balance between cost, convenience, and speed.

For instance, Wise offers a range of options like debit cards, direct debits, and even Google Pay. This gives businesses the freedom to make payments to vendors as they see fit.

11. Connect your bank account or financial service provider to your accounting software

To make your vendor payment process that much more efficient, you can connect your bank account or your financial service provider account directly to your accounting software. Connecting these helps streamline your financial tasks by automatically syncing payments, reducing manual data entry, saving time, and minimizing errors.

If you were to make a payment to a vendor, for example, the details would automatically appear in your accounting software. Instead of having to import the data, you get to keep your books clean and accurate.

Wise has an app marketplace that hosts a variety of business and finance applications that can integrate with your Wise Business account – we’re talking QuickBooks, Xero, Wave, and Oracle NetSuite, among others. Embracing these integrations can truly transform your vendor payment process.

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Vendor payment systems and providers

Behind any successful business is an efficient vendor payment system at the heart of its operations. It's what keeps the business running smoothly, making sure supplies arrive on time, services are conducted promptly, and relationships are continuously strengthened.

To give you a head start, we’re about to talk about a few vendor payment services and providers. We'll look into how these systems function, what makes one provider different from another, and why you should choose one over the rest.

1. Wise Business

Wise Business is great when it comes to making international money transfers quicker, cheaper, and more transparent. Crafted with businesses in mind, Wise Business offers a host of features to simplify your vendor payment process, from multi-currency accounts and batch payments to seamless integrations with your favorite business tools.

The platform also stands out for its commitment to fair, transparent pricing. You get the real, mid-market exchange rate for every payment, with transparent fees that can be lower than other providers. Add in the handy Auto Conversion feature and the convenience of instant transfers, and Wise Business proves to be an effective, cost-sensible choice for all things vendor payments.

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Some features Wise Business users love
Receive Payments like a local: Businesses can pay a one-time fee for accounts details in global currencies, such as USD, EUR, GBP, CAD, so they can receive money without any additional fees
Account Software Integration: QuickBooks, Xero, Sage, and Wave
Batch Payment Tools: Pay up to 1,000 invoice in one instance
The Most International Account: Hold 40+ currencies at once
Transparency: Wise Business is trying to get rid of all your business account fees

2. Tipalti

Tipalti is a holistic cloud payment automation platform meant to streamline your entire vendor payment operations. Tipalti handles everything from supplier onboarding and invoice processing to tax compliance and payment remittance, creating a one-stop solution for businesses dealing with a considerable number of vendors.³

What sets Tipalti apart is its ability to remove much of the manual labor involved in vendor payments, with 26,000 rules to reduce payment errors. The platform minimizes human error, accelerates payment processes, and ensures regulatory compliance. In a nutshell, Tipalti works to significantly ease the burden of vendor payment management.

Learn More: Tipalti Competitors and Alternatives

3. Stampli

Stampli is another cloud-based platform that focuses on the accounts payable process for businesses. It provides a centralized location for invoice management, making vendor payments much more manageable, efficient, and transparent.⁴

Stampli's standout features lie in its use of Artificial Intelligence to automate invoice processing and its interactive interface that enables collaborative invoice approvals. With Stampli, you can leave behind manual data entry, process invoices faster, communicate efficiently with stakeholders right from the platform, and enjoy full support from over 70 ERP integrations.⁴ 

See the Best Banks for Small Businesses >>

Learn more:

Stampli Competitors and Alternatives
Contractor Payment Software: Your Best Options

Please see Terms of Use for your region or visit Wise Fees & Pricing for the most up to date pricing and fee information.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks.

Sources:

1.https://www.trustpilot.com/review/wise.com
2.https://www.pymnts.com/news/b2b-payments/2022/41-percent-buyers-saw-late-fees-vendor-payments-last-year/
3.https://tipalti.com/product/global-payments/
4.https://www.stampli.com/