Cutting out checks
Washoe County, Nev., has implemented an electronic payables (ePayables) program to automate payments to vendors and move toward a paperless environment. Participating vendors now can receive their payments within one to three business days by accepting an electronic credit card payment from the county. The county also earns an annual rebate from its bank, based on the volume of card payables enrolled.
The county initiated its ePayables program last year to reduce costs, improve payment efficiencies, maximize cash flow and increase revenue. The county worked with Bank of America Merrill Lynch to implement the program in eight weeks, starting in May 2010.
In the program, each participating vendor receives a unique MasterCard account number to process their payments. The cards have a limit of $0 until the county authorizes payment on the vendor's invoices. Once a payment to a vendor has been authorized in the county's SAP accounting system, a payment file is sent to Bank of America's Works Application through secure file transfer protocol (FTP).
The Works Application processes the file to increase the available funds on the specified vendor card from $0 to the exact payment amount authorized by the county. Simultaneously, the application forwards a remittance to the vendor using fax or e-mail. The vendor processes the payment by keying in the remittance data to its accounting system and then the credit card number into its card payment terminal.
The county's vendors previously were paid by check with net 30 payment terms. The terms continue to be net 30, but once they are notified their cards have been funded, participating vendors can receive their funds within 24 to 48 hours. They do not have to wait for a check to be received, processed and cleared through the bank.
The first payment file was submitted on July 1, 2010, and the ePayables program is steadily enrolling more vendors. Although check payments will be necessary for some vendors, the county expects electronic payments will account for a majority of its payables.
Each month, Washoe County reconciles the payments processed by vendors to the bank credit card billing statement and sends payment to the bank. That increases the county's cash flow by approximately 45 days. Washoe County estimates it will earn an annual rebate amount of $192,000 in the first year, and realize savings from reduced check printing, banking and mail costs of approximately $8,500.
Project: Electronic payables program
Jurisdiction: Washoe County, Nev.
Agencies involved: Technology Services, Accounts Payable and the Comptroller's Office
Vendor: Charlotte, N.C.-based Bank of America Merrill Lynch
Date started: July 2010
Cost: No implementation or ongoing program costs