How COVID-19 has disrupted payments to vendors, and how you can can profit when paying invoices
The majority of corporate procurement and accounts payable (AP) departments pay their vendors using checks or ACH today. However, COVID-19 brought forth one of the most sudden changes in the dynamic between vendors and buyers.
Checks and ACH are highly non-secure ways to settle payments — exposing your bank account and routing numbers means that there’s a higher surface area for invoice fraud. Instead, payers can use a corporate credit card or purchase card to pay invoices that are sent by a Level 3 (Level III) certified merchant.
Invoices sent by these merchants include level 3 data that includes line items and SKU data which cuts down fraudulent charges that lack these data fields and are inherently less prone to fraudulent activity. Additionally, using a credit card helps protect you from fraud as well. If a fraudulent charge is made on your account, you can dispute it — and retain a higher level of control over your business’s finances.
The benefits of using a corporate card
Credit card help with cash flow management and cash planning within the company. By paying vendors with credit cards, the company is able to receive the money from each vendor payment immediately. This also means that the company doesn’t have to wait for its ACH payments to process through the bank, creating a faster cash cycle.
In addition, by paying invoices with a credit card, instead of ACH or checks, you can keep a better track of what you’ve spent money on and where you’ve spent money. This is because the balance due is posted to your credit card statement and you can easily reconcile this with your company data. If you pay vendors with checks or ACH, the vendor may not provide itemized statements which makes it more difficult to manually manage what has been spent on.
Things to consider when paying vendors with credit cards
In order to avoid fraud and chargebacks, there are some things you should consider when paying vendors with credit cards. For example, if possible, try to avoid paying vendors who don’t have high level data (such as Level 3 data fields) on their invoices.
Doing so exposes you to more fraud risk from unscrupulous vendors who may attempt to submit bad invoices without this data. Also, make sure that you are paying only vendors who are Level 3 certified merchants.
Moreover, try to avoid paying any merchants who don’t provide itemized statements with their invoices (especially if they don’t have Level III certified merchant information). Doing so will help reduce risk while making it easier for you to reconcile what has been paid and when payments were made.
How to get an unfair advantage in the marketplace using Level III data
When you’re operating a retail business, having access to Level 3 data on your purchased goods can be a huge advantage. Instead of paying for inventory based on what a vendor tells you, you can see how much you’re paying for your goods — down to the item level — on your statement. This allows you to make better pricing decisions in the marketplace, and gives you a competitive advantage over your competitors by giving you insight into how other retailers are pricing their goods.
How can you use Level 3 data to protect your business from fraudulent activity?
When you’re making a purchase from a vendor that has Level 3 data, it’s much easier to catch fraudulent charges. A good example of this is when a vendor includes their item level data on an invoice. If you see an item that doesn’t match up with the vendor’s master inventory, this could be a fraudulent charge. If this happens, you can simply contact your bank or merchant processor and dispute the charge.
Levels of Merchant Data — Levels 1, 2 and 3
The most well-known level data (Level 1) is the data that most ecommerce businesses use for their sales statements. This level of data includes totals and subtotals but doesn’t include line item or SKU data. In order to get line item and SKU data, you have to use Level 2 or Level 3 certified merchants.
Photon Commerce enables vendors and payors to enhance their transactions with Level 3 / Level III data using AI solutions. Book a demo today at www.photoncommerce.com
