How is technology changing the way payments are processed during the COVID-19 pandemic?

Aug. 14, 2020

What is your position within your company?

Jason Krankota: I am vice president of sales in construction for Nvoicepay, Beaverton, Ore.

How is the construction industry being transformed with payment innovations as social distancing is forcing companies to go paperless?

The simple act of printing a check and stuffing it into an envelope has suddenly become a logistical challenge. I’ve heard stories of companies that have labor-intensive processes where a “check printer” goes to the office to print the checks and then leaves. The “check signer” then arrives at the office to sign them all. Then, a “check stuffer” comes into the office to get the checks into envelopes with postage metering and drops them off at the post office. I’ve also heard stories of employees who had to bring a check-printing machine home with them. Payment automation companies remedy these situations by using an electronic upload of a payment file to make all the payments for companies without them having to print any physical checks.

How can roofing contractors benefit from implementing an electronic supplier payment system?

There are so many benefits. Contractors can reduce or eliminate paper checks, which, in turn, reduces the costs associated with making supplier payments. Paper checks typically cost contractors $3 to $5 per check to produce and mail. Electronic payments can be produced at a fraction of that cost. Staff dedicated to check production can be directed to work on more valuable tasks, and in times of growth, electronic payment systems can eliminate the need to hire additional personnel in the accounts payable department.

Risk mitigation is another huge benefit. Some electronic payment providers assume the risk of the payment, which means they are producing and mailing the checks or generating automatic clearing house payments and are responsible for fraud or cybercrime. Of course, check fraud has been around for a long time, but wire fraud is growing at a much more rapid pace.

Automated clearing house and wire payments tend to be larger dollar amounts. Recently, there have been a number of news stories around the U.S. about automated clearing house fraud in the construction industry. What usually happens is a fraudster will drive by a construction site and determine who the general contractors and subcontractors are. They will then send phishing emails into that network and when someone clicks on a link or attachment, it uploads a virus that allows the fraudster to monitor emails between general contractors and subcontractors. This allows them to create a fraudulent email that looks legitimate and instructs the general contractor to make a payment to a new bank account that a subcontractor has allegedly created. The money disappears into a fraudulent bank account.

A payment solutions provider like Nvoicepay is bonded and insured for cybercrime. We cut checks and send automated clearing house payments while assuming the liability on those payments. It eliminates the risk of fraud being perpetrated when checks and supplier banking information are being managed in-house by the contractor.

How does an electronic payment system differ from electronic payments through a bank?

Many banking systems require customers to upload separate files for each payment type such as a check, wire transfer, automated clearing house or credit card. Additionally, the customer is responsible for making sure payments are taken in timely manner. A true “turn-key” payment system provides a single-file and single-workflow experience to the customer. It’s a combination of high-technology and high-touch.

One payment file for all payment types can be uploaded to a portal where the customer has full visibility and control over approving and releasing payments. Once payments have been released, the payment provider assumes responsibility to ensure the payments are taken in a timely manner. Any questions or actions needed on the payments, such as canceling checks, reissuing checks or updating banking data, are handled by the payment provider.

What are the dos and don’ts for contractors when researching and selecting a payments solution and vendor?

First, determine what you want a payment solution to do for you. Some folks are just looking to earn rebates on credit card spending. There are certainly payment solutions in the market that help you enroll a portion of your suppliers to accept a virtual credit card.

If you’re looking for a solution that can help you across your entire accounts payable payment process, make sure you understand costs. You’ll typically see monthly service and transaction fees as part of your investment, but it’s so important you understand what type of payment file structure and format the provider needs from you. If you commit to a provider before agreeing upon file mapping responsibilities, you may be hit with some unexpected costs.

Just as important is making sure the payment solution provides the services you believe are valuable to your organization. Do you want to transfer fraud risk? Do you want to be responsible for managing payment data in your accounting system or have that managed for you? Do you want the payment provider to manage all payment types or do you want to keep payments like checks in-house? Take into consideration what you feel comfortable offloading today and what you may feel comfortable offloading in the future. Make sure the payment provider can scale with your company.

How long does it take to implement payment automation?

The length of an implementation can depend on a few variables: How much work is needed on a payment file for the payment provider to be able to accept it into their system? Does the customer want to get as many suppliers as possible converted from check to electronic payments before going live? And is the customer dedicated to working at the implementation team’s pace?

Recently, I worked with a customer who needed to move to a touchless payment environment as soon as possible. We already had application programming interface integration developed that could accept a payment file being sent directly out of their accounting software. We were able to get them live in two weeks. We started by cutting a lot of checks for them but have been able to go back and convert a lot of the checks to an automated clearing house and virtual credit card after going live.

More typically though, I would say you should anticipate anywhere between a six- to 12-week project to get up and running on a payment solution. The critical steps are testing the payment file, reaching out to suppliers to determine how they want to be paid and collecting the relevant payment data and then training and testing with live payments.

Anything else roofing contractors should know?

You are in a business that is all about managing risk. You only make money when your crews are on a roof, and each job is full of risk. You are all well-versed in managing and mitigating risk, but maybe you’re overlooking the risks associated with making supplier payments. Working with a payment solution provider can solve two challenges facing your industry: virtual working environments and payment fraud. I encourage you to look into your options today.