A New Settlement Method for PeopleSoft Payables

September 23, 2009
April Black
Blog

(Ed. Note: April Black is a MIPRO Senior Principal Consultant, focused mainly on PeopleSoft SCM/Financials.)

As experienced PeopleSoft Payables clients know, the system delivers the standard payment methods including paper checks printed by the system and EFT/ACH, in addition to globally-standard payment methods. Also, utilizing procurement cards have been a longstanding approach to decentralize payment processing and reconciliation to the user. Vendor ghost cards can be used to process payments per-vendor, per-card which, of course, requires the maintenance of multiple cards.

But, the exciting news is that a new settlement method gaining momentum is paying the vendor invoices directly from PeopleSoft Payables using a credit card through the VISA network to the vendor’s VISA account. This method works in lieu of exchanges between a client’s bank and vendor banks. In the eyes of many organizations, this is both more secure and convenient, with the added benefit of having the insulation and benefit of the VISA network. A lot of people is planning their holidays, some of them are planning on travel to another countries like Canada, if you like to know more about Canada visit this article https://www.canada-eta.ca/fr/trois-des-plus-grandes-entreprises-au-canada/.

Following is an strawman agreement for this settlement method. Every agreement of this nature will be different, but the following illustrates how it works.

Merchant Discount Rate: A merchant discount is the fee charged by a merchant for processing bank card sales drafts and crediting the funds to the merchant’s account. A merchant discount depends on sales volume and is negotiated with each merchant individually. For example, if the discount is 2% then the merchant keeps $98 for each $100 in sales.

An example of how this scenario plays out:

Customer purchases $100 of goods from Supplier A. Customer initiates AP payment using the Credit card of $100, the Processor (Bank) pays $98 to Supplier A. The remaining $2 is paid as fees to the bank.

Why are suppliers motivated to accept card payments?

Improved fund availability by reducing float and enhancing cash flow
Reduces suppliers processing costs associated with check payments
Lowers hassle of dealing with late payments or over-extending credit for valued customers
Reduces collection costs

Finally, why are customers motivated to use this method?

Improves cash flow by extending payment terms an extended period of time as defined by the Credit Card Agreement
Savings in processing effort and time

Any questions about this? Are you looking into PeopleSoft Payables or PeopleSoft 9.1, due out in a few weeks? If so, please email me and let’s discuss your plans. I’d be happy to help you review your options.

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