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Automated Financial Systems

Is an Automated Vendor Payment System a Good Idea

by Yooz on 02.14.2023

vendor payment system

Long before the advancement of digital systems, debts were typically settled manually by someone working within the accounting and finance department. However, to the delight of many employees, these "dark ages" have passed. Thanks to advancements in technology, automated financial systems have revolutionized the vendor payment system and become a fundamental aspect of many organizations' financial operations.


But what really is an automated vendor payment system and how does it work?


What is an Automated Vendor Payment System and How Does It Work?


Automation refers to the digital processing of financial tasks through technology and software, so automated financial programs are applications that enable a company to automatically input, sort, review, and finalize financial data and transactions. Thanks to technology, all of the tasks are completed with little to no human input.


An automated vendor payment system in particular is a type of automated financial program that comes at the end of the invoice process. It is the process by which invoices - and therefore vendors or suppliers - are paid, again using technology to complete tasks formerly done by a human. It is often used with Accounts Payable (AP) automation and other programs to streamline financial processes.


Who Can Use an Automated System


If you have a small, medium, or large-scale organization, you may wonder if transitioning from a manual system to an outsourced (commercial) automated vendor payment system is appropriate for the business. The answer is yes. As you can see just from the few benefits mentioned above, digitalizing financial systems and processes can have numerous benefits and support the organization in achieving goals.


Can there be resistance from employees? Of course, but the key is to identify and recognize these challenges along with the operational ones so as to address them. When done successfully, not only will the employees gain increased technical skills, but the entire company will be better positioned to stay competitive.


What Can an Automated Process do for Me?


Automated processes are employed to complete otherwise tedious tasks within a fraction of the time, offering several  of benefits including:


  • Increased accuracy: Automated systems significantly increase accuracy and reduce the risk of errors.
  • Enhanced efficiency: Digital vendor payment systems offer a seamless transactional process that increases efficiency and ensures that payments are made swiftly.
  • Cost savings: With software completing tasks that employees were once required to do manually, vendor payments and other financial operations can be carried out in a fraction of the time that it once took to complete. Not only does this reduce labor time, but it reduces overhead costs associated with hiring, training, and paying employees.
  • Improved customer experience: Thanks to the creation of a digital audit trail, automation helps provide an improved customer experience by enhancing vendor communication and transactions.


Having the right Accounts Payable automation solution in place may benefit the entire organization but the last part - improving vendor communication - is key. After all, if you can't ensure that your vendors get their concerns answered and get paid, the entire invoice process is broken (not to mention the potential legal implications!).


Improving the Vendor Payment System


We've mostly moved on from the literal hand-to-hand delivery of payment. However, there are still hiccups in the payment process. Not only are these inconvenient, but they are also costly to all parties involved. Not only do on-time payments ensure that the vendor's cash flow stability and a continued good relationship, but it also ensures that the organizations receives goods on time and without accumulating late payment fees.


Consider the statistics: according to the S&P Global report, governments are starting to view supply chain resilience at the level of a "national security imperative." Procurement Tactics states that according to DDC, concerns about supply chain sustainability and corporate practices are on the rise in 2023. Yet, at the same time, PYMNT's research report "The Financial Performance Quandary: Leveraging Automation to Better Manage Non-Payroll Spending", 41% of buyers saw late fees on vendor payments in 2021. Clearly there is work that needs done.


Ensuring a consistently solid vendor payment system is important for all the parties involved in the process.


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Why Automate Vendor Payments


Ensuring a consistently solid vendor payment system is important for all the parties involved in the process. Automating the vendor payment systems extends the benefits of and streamlines Accounts Payable (AP) automation all the way from purchase-to-pay. It specifically leads to:


  • Transparency: with an automated payment process the entire invoice workflow becomes transparent.
  • Speed and security: automating payments ensures that payments are done on time, from approvals to the actual payment and confirmation itself.
  • Cost effectiveness: by transitioning from paper checks to some form of electronic payments or ePayables, businesses ePayables, businesses can eliminate all of the associate costs from paper supplies and postage to hiring more labor to complete the tasks.
  • Improved strategy: Accuracy in data is key to estimating cash flows and planning budgets.
  • Compliance: an AP automation system creates a digital audit trail, tracking each step of the process. Combined with the fact that all data storage is centralized and easily accessed, complete visibility is ensured.
  • Scalability: an automated payment system is scalable, meaning that the system is agile and can easily adjust to the needs of the organization.
  • Simplicity: vendor payments can be automatically scheduled as well as added to financial dashboards or reports.

With all of this list - ways to essentially make your life easier - what isn't to like?


Features That Matter


Well, there is more to like. Selecting a vendor that provides a comprehensive suite of features can save you additional time and money. This is the very reason that Yooz extended its capabilities to include YoozPay, allowing for payment of vendors directly from the Yooz platform. Consider the following:


Bank and Credit Card Processing


According to the Federal Trade Commission (FTC), data showed a loss of over $5.8 billion in 2021 due to fraud. With over 108.6 million daily credit card transactions taking place in the United States, vendors and organizations alike are looking for secure bank and credit card processing options. This is something that automated financial systems provide through end-to-end encryption.


Automated Secure Data Collection Processes


Automated financial systems offer the capability of automatic data collection processes from various channels including email, mobile, and scanned documents. From here, Artificial Intelligence (AI) extracts any data and automatically inputs it into your systems within seconds, leaving no room for error or information duplication.


Cloud-Based Solution


Existing in the cloud enables easily scalable digital storage of documents including invoices and receipts. This real-time centralized data bank makes report generation faster, better, and more complete. In addition, by being accessible 24/7 from anywhere to specified users with a mobile connection, cloud-based solutions reduce the physical space needed to store documents and minimize the risk of losing them.


Supplier Relationship Management


Reviewing and managing cash flow has never been easier. You can view the past, current, and future transactions of any vendor at the touch of a button. Not only does this enable you to create better (and faster) financial forecasts and reports, but it also means that employees can reference specific information and quickly answer any vendor concerns.


I Get it Can be Good for Me But...


It's easy to say why an organization should "do digital" and use AP automation, even why to ensure there is an automated vendor payment option, but it is worth noting that the transition to a digital system involves several steps:


  • Selecting an appropriate vendor: researching available vendors, their costs, and any services that may be included in the price.
  • Integration with other financial systems: once you’ve selected your automated, integrating it with any other systems, such as existing Enterprise Resource Planning (ERP) software, is the next step.
  • Configuring security: before inputting any data into your automated financial systems, it’s paramount that you configure security. This is part of reducing the risk of fraud and cyber-attacks plus protecting your vendors' data and confidentiality.
  • Providing employee training: once the system is configured training your employees will ensure that they understand how to use and benefit from the software.
  • Synching existing data: one of the final steps in transitioning involves uploading any existing data including outstanding invoices and vendor information.


Challenges to Consider Along the Way


While automating vendor payment systems has numerous benefits, they also comes with challenges that must be taken into accounts. Four of the most common ones include complexity, cost, integration, and security.

Complexity comes into play with setup and regulations. Although an automated payment procedure helps streamline the onboarding process (or change their existing preference). Once the vendor selects their preferred method of payment, the approval process needs to be assigned based on the level of payment required (it can be set to automatically process or routed for approval). Depending on the method of payment there are certain regulations which must be taken into accounts such as those which pay be required by banks when dealing with electronic credit cards and fund transfers.

Cost is factor as there are typically initial costs upon implementing the automated system. However, not only can these costs be regained as a result of the new software processes, but it should be noted that there are additional potential savings thanks to the elimination of late payments and the possibility of early payment discounts.


A complete AP automation platform will include a payment feature such as YoozPay to help get from invoice-to-pay in record time. This simplifies the integration factor with any existing company system.

Finally, AP automation (and therefore your automated vendor payment system) offer an increased level of security thanks to two- and three-way verification. However, to further increase security consider maintaining limited access to certain features and parts (such as the ability to change approvers) as well as security features such as multi-factor authentication and data encryption for those accessing company systems.


Multi-factor authentication, for example, significantly reduces fraud and cybercrime as it requires anyone that logs into the network to confirm their identity via external methods. This could include a mobile authenticator app that provides a single, one-time password or code. Multiple security systems working in tandem serve as extra protection against rising cybercrime attempts.


What Is My Take-Away?


The title states the question "Is an automated vendor payment system a good idea?" Hopefully at this point you'll see that automated financial systems - including vendor payment systems - have the potential to significantly increase efficiency and security across any organization.

So is it a good idea? The answer is unequivocally yes.

Should you think of automating your vendor payment system? The answer is unequivocally yes.


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