Banking on Automation: The Smarter Way to Handle Vendor Payments

In today’s fast-paced world, efficient, accurate, and secure financial management is vital. When it comes to vendor payments, many businesses turn to their banks to handle these transactions, believing that they can provide the simplest and most secure option.  

However, banks often fail to provide the comprehensive solutions businesses need for high-level, optimized accounts payable procedures. This is where an automated AP solution comes in, seamlessly transforming AP processes into effective, modern financial operations.  

In this blog, we’ll take a look at the risks of relying on your bank to process important vendor payments—and why an automated AP solution is the better choice. 

The Drawbacks of Relying on Your Bank for Vendor Payments 

While banks are often trusted resources for many things financial—accepting deposits, lending credit, playing the role of mediator between various businesses, and more—AP-related processes aren’t exactly their forte. It’s like seeing a general practitioner for a highly specialized surgery. While they may be able to perform the necessary procedure, a specialist surgeon would provide more precise, expert care.  

The generality of bank-run vendor payments displays itself in a number of ways, but the most obvious include:  

Limited AP Functionality 

Banks typically offer basic payment processing services. While these may suffice for smaller businesses with limited and straightforward business needs, mid-sized, growing, and large companies require more advanced AP functionality.  

If your business relies on its bank for vendor payments, it may experience: 

• A Lack of Integration: Banks usually don’t seamlessly integrate with your existing ERP. Even if they do, there are significant limitations that an automated AP solution wouldn’t suffer from. This leads to an uptick in manual data entry, which in turn increases the risk of errors.  

• Limited Reporting and Analytics: Banks provide basic transaction histories but lack the level of analytics that would provide your business with valuable insights into spending patterns or identify cost-saving opportunities.  

• Segmented AP Processes: Banks focus on payments, not the entire AP process. Using your bank for vendor payments cuts the AP process in half, leading to inefficient, incomplete workflows. 

Security and Compliance Concerns 

Banks are highly regulated regarding security—but even those safeguards rarely account for the same level of specialized features and compliance support that modern AP processes require. Vendor payments that are processed through your business’s bank may experience: 

• Limited Fraud Prevention: Banks have basic fraud detection mechanisms and processes in place, but they are unlikely to be tailored to meet the specific needs of your AP payments operations. They’re also not integrated into your AP workflow, again needlessly complicating your vendor payments processing tasks.  

• Compliance Challenges: Keeping up with ever-changing regulatory requirements can be challenging. Banks are focused on their responsibilities as a financial institution—not as a vendor management organization. This means vendor payments made via your business’s bank may be at risk of falling short of important AP regulations. All-in-one AP providers, on the other hand, offer built-in features that ensure your important AP and payment processes remain compliant throughout their lifecycle without putting additional strain on your team.  

Why You Should Use an Automated AP Solution for Vendor Payments Instead 

We’ve touched on a few reasons why using your bank for vendor payments can cause more harm than good—and a few ways an automated AP solution is a more intuitive partner to process these transactions.  

Perhaps the most important reason to turn to an all-in-one AP system for your vendor payments is this: that’s what it’s been designed to do. While banks can handle these payments, that’s not their primary function. 

The Importance of Healthy Vendor Relationships

With this discrepancy in mind, it’s important to note an area where an AP solution can have the biggest impact in regards to vendor payments: your business’s vendor relationships. Banks simply can’t offer the level of support and vendor-centric support that an automated AP solution provider can. 

An all-in-one AP and payments provider helps improve your vendor relationships by streamlining the ultra-important payment process and providing valuable visibility into its overall health. This often looks like: 

• Faster Payments: Automated AP and payments solutions ensure scheduled, timely payments that can drastically improve your business’s standing with its vendors, which can lead to more favorable contract terms and even dynamic discounts.  

• Easy-to-Use Vendor Portals: Instead of digging through bank records for important financial records, many AP solution providers offer customizable vendor portals where you can track and manage the status of invoices and payments. This simplicity greatly reduces the number of inquiries your AP team deals with on a day-to-day basis.  

• Enhanced Communication: With this improved transparency comes a clearer line of communication between your business and its vendors. This is a win-win for both parties, as the partnership is now more reliable and cooperative.  

In the past, banks have been a standard choice for vendor payments. However, in the modern business world, they often lack the comprehensive functionalities, cost efficiencies, security measures, and relationship-building tools that best benefit AP and payment processes.  

An all-in-one AP and payments provider can offer a more streamlined, efficient, and secure solution, helping your business save time and money while cultivating healthy vendor relationships. If this sounds like something your business could benefit from, schedule a demo with a DocuPhase AP and payments automation expert today!