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Credit/P-Card Payments for A/R transactions

We're seeing an increase in Credit/P-Card payments for B2B transactions. Some are P-cards intended for rather immediate payment following the typical PO -> Order Confo -> Order Fulfillment/Shipping -> Invoice. These are used at very large Fortune 500 companies. Other payment transactions are requests to use a credit card to pay an Open A/R Invoice. Some are "Order now, ship next week, charge to the credit card on file on the 1st or 15th of the month". In other cases, the customer may face a credit hold due to old outstanding invoices; they will then tender a credit card account to pay the old open invoice (60-90-days) so that they can place a new order - with terms! Obviously, acceptance of credit cards increase cost of sales expense via CC merchant fees. These are B2B, non-swipe transactions. Sometimes the card is tied to the other business owner's CC account that is a "reward account" so the merchant account discount fees are higher than the lowest advertised rates. In both cases, that increases the card "discount" fees. How are other companies dealing with increased credit card usage in an industrial B2B environment? Does your company add 2-3% as a surcharge? Decline CC? Allow if requested after standard terms have been extended? Banks and Credit Card companies are encouraging their commercial customers to utilize P-cards. How do you feel about accepting and dealing with the increased costs?


Stuart Brown
Title: CFO
Company: Red Robin
(CFO, Red Robin) |

I think that this is becoming a cost of doing business. We are one of those companies that are using p-cards more to pay bills. For many of our smaller vendors and suppliers, this has been a boon as they get their cash earlier and simplifies their billing process. It some ways it replaces the old 2% discount if paid within 10 days.

(Director) |

We charge a fee for customers that want to take terms and then clear old AR. We also modified bid practices to not allow them to charge old AR off by credit card without a fee. This mainly targets our biggest customers who have better pricing and longer terms to pay. This is big dollars for us (savings) since most of them quickly moved to check and ACH versus trying to clear old AR this way.

We do make exceptions for high risk clients and high margin clients where clearing old AR by CC now is acceptable expense.

Any customer paying up front (time of shipment/invoice) we do NOT charge since we are not financing any terms and have no collections costs. This we accept as a cost of doing business today.

Christine Speedy
Title: Global Business Development
Company: CenPOS
(Global Business Development, CenPOS) |

Forward: I sell related products for this subject.

For my personal B2B equipment sales, I've encountered every situation you brought up, and have all the same frustrations, albeit on a smaller scale. I recently switched to an entirely automated solution. I bumped up all my prices to reflect what I wanted to be paid if they used a credit card and then discounted for checks, the current primary payment method (98%). I don't care how they pay any more. (FYI - One customer immediately switched to credit card.) I know this is not likely a practical solution for you, but please read on.

There are potential compliance issues with the practices being discussed. Commercial businesses adding a surcharge for paying by credit card may be in violation of many state laws in addition to the card brand rules of acceptance. Example: Visa International Operating Regulations: "A Merchant must not add any surcharges to Transactions, unless applicable laws or regulations expressly require that a Merchant be permitted to impose a surcharge." (The exceptions are restricted to utilities and a few other industries.)

However, there is no restriction on discounting by payment type. Credit card price is "A", discount "X" for debit card, discount "Y" for check.

For your situation, the three most challenging rules merchants have trouble complying with for business, corporate and purchasing cards:

- authorization and settlement within 72 hours for all card not present sales
- authorization amount and settlement amount must be equal
- sending level 3 data, enhanced data that applies only to certain cards

Without all three of the rules met, penalty 'interchange downgrade' or 'non-qualified' fees can exceed one percent vs. when all rules were complied with. There are literally hundreds of rules to navigate. To manage rising costs, it is essential to automate the interchange qualification process. Due to complexities this means using an intelligent, cloud-based solution. Do you have one in place?

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