Paying vendors online means settling supplier invoices digitally instead of issuing paper cheques and invoices. It involves choosing the right payment method, building a process that can scale, and ensuring the details you have on file are accurate. For most businesses, the weak points are bad bank details collected over email, approval chains that run through someone’s inbox, and international payments that are handled manually via electronic transfer.

The cost of getting this wrong adds up quickly: invoice processing costs on average about $10 per invoice and takes days from receipt to payment. Paying online can speed up the process and reduce errors.

Below, we’ll explain how to pay vendors electronically, how the end-to-end process works, where it tends to break down, and how to improve it.

Highlights

• Vendor payments typically fail because of bad bank details, manual approval bottlenecks, and a lack of visibility into payment status.

• Automating approval routing and collecting verified bank details through a secure portal removes two big sources of delays and errors.

• Modern tools that let you send funds from your existing bank account to vendors in their local currencies can simplify online vendor payments.

What is a vendor payment?

A vendor payment is what your business sends to a supplier, contractor, or service provider in exchange for goods or services they’ve already delivered or are contracted to deliver. It’s the closing step in the procure-to-pay cycle, where purchase orders and invoices convert into money movements between accounts.

What are the common vendor payment methods?

The payment method you choose affects cost, speed, and the amount of manual work involved for your team.

Here’s how the main options compare:

• Direct debits: These move funds electronically between bank accounts. Standard direct debits typically settle in one to three working days, with same-day options available for faster transfers. Direct debits work well for recurring domestic payments where timing isn’t urgent (e.g., payroll vendors, subscription services, regular suppliers).

• Wire transfers: These settle the same day domestically or within one to five working days internationally. They’re faster and work across borders, but they’re essentially irreversible once sent. Use them for large, time-sensitive, or international payments where the cost is justified.

• Virtual cards: A virtual card contains a single-use card number with a fixed spending limit; it’s sent to the vendor for them to charge. These cards offer strong fraud controls, but they work only with vendors that accept card payments, which not all do.

• Push-to-bank disbursements: These send funds directly to a vendor’s bank account through various payment systems. Settlement times vary by country and provider, but this approach is becoming a standard option for businesses that pay vendors in multiple currencies.

• Cheques: These are still common in industries where vendors expect them, but they’re typically slow, expensive to process, and often cause reconciliation problems.

How does the vendor payment process work?

From end to end, a vendor payment moves through six stages.

Here’s how the process breaks down:

• Invoice receipt: The vendor submits an invoice by email, through a portal, or sometimes by mail. Your team logs it, matches it to the relevant purchase order or contract, and routes it for review.

• Invoice verification: Someone checks whether the invoice is accurate (e.g.; correct amounts, line items, vendor details). This is where mismatches get flagged before they become disputes.

• Approval: Depending on your internal controls, invoices above certain thresholds might need sign-off from a manager, department head, or finance lead. This step is necessary but often slow when it runs through email chains.

• Payment scheduling: Once the invoice is approved, it gets scheduled for payment. Terms such as net 30 and net 60 mean you can hold cash until the due date. Paying too early costs you cash float, while paying too late can damage supplier relationships and trigger penalties.

• Payment execution: The actual transfer happens. Your accounts payable (AP) team initiates the transaction through the chosen payment method.

• Reconciliation: The payment gets matched to the invoice in your accounting system and the liability closes. At scale, or when payments fail, this is where the bulk of manual cleanup occurs.

What challenges slow down vendor payments?

Most vendor payment problems are caused by a few consistent weak points.

These are most likely to slow down a payment:

• Bad bank details: Vendors might change banks, mistype account numbers, or provide details for a different entity from the one you’re paying. When a payment fails because of this, you must recollect information manually, which can take time and create a security risk if correspondence occurs over email.

• Manual-approval bottlenecks: If invoice approval requires someone to open an email, find an attachment, remember the context, and forward it to the right person, an approval queue can form.

• Invoice errors and disputes: A mismatched purchase order number or incorrect amount means the invoice has to go back to the vendor, get corrected, and re-enter the queue.

• International complexity: Paying a vendor in euros when you operate in dollars means working with currency conversion, different banking systems, varying settlement times, and occasionally local compliance requirements. Many businesses handle that complexity with electronic transfers on a case-by-case basis, but this can be slow and expensive.

• Lack of visibility: When your team can’t see the real-time status of a payment, they spend time chasing confirmations.

What are common mistakes businesses make when it comes to vendor payments?

Even businesses with structured AP processes are prone to making mistakes. But many of them are fixable once you know where to look.

Here's what to watch for:

• Paying from too many accounts: When different departments or entities initiate payments from different bank accounts, reconciliation can get complicated fast.

• Ignoring early payment discounts: Businesses usually focus on not paying late but don’t always realise the potential benefits of paying early. Some vendors offer early payment discounts, often expressed as 2/10 net 30 (i.e., you get a 2% discount if you pay within 10 days).

• Treating all vendors the same: An individual freelancer and a major materials supplier have different risk profiles and different payment expectations, and raise different implications if something goes wrong. Segmenting your vendor base lets you apply the right process to the right relationship.

• Collecting bank details insecurely: Email remains a frequent way businesses collect vendors’ banking information, but it’s prone to interception or spoofing. Business email compromise (BEC) fraud works by intercepting or spoofing these exchanges and substituting fraudulent account details. Collecting bank details through a verified portal closes a real attack vector.

• Not auditing vendor records: Vendor master files can accumulate errors over time, including duplicate entries, outdated addresses, and outdated banking details. Businesses that don’t periodically audit these records can end up with payment failures, returned funds, and, in the worst case, payments sent to the wrong account.

• Skipping payment confirmation to vendors: Vendors shouldn’t have to email you asking whether a payment was sent. A simple automated notification when payment is initiated can minimise inbound queries and build trust in the relationship.

How can you improve your vendor payment process?

The fastest wins in vendor payments usually come from removing manual steps. Much of the friction in a vendor payment process is structural (e.g., built-in delays from how approvals are routed, vendor details are collected, and payments are initiated).

Here are some fixes that can save you time:

• Automate approval routing: Define thresholds in your AP software and route invoices automatically based on amount, department, or vendor type. When approvals are automatic for low-risk payments and targeted for high-risk ones, the whole process can move faster.

• Improve vendor onboarding: A lot of payment failures can be traced back to the moment you collected vendor details. If that happened over email, you could have incomplete or outdated information sitting in a spreadsheet. Stripe Financial Connections lets vendors connect their bank accounts directly so you’re working from verified account details rather than trusting whatever they typed into a form.

• Support multiple payment methods and currencies: Not every vendor can receive a direct debit, and not every international vendor is set up to receive a electronic transfer. The more payment methods you can offer, the less friction there is in the relationship.

• Use payment links for recurring vendors: Instead of emailing bank detail forms or chasing updated information manually, give vendors a dedicated link where they can set up and update their payment preferences. A dedicated vendor portal lets you collect verified bank details once and avoid starting from scratch each time.

• Reconcile automatically: Modern AP software can match payments to invoices without manual input. If you’re still reconciling payments by hand, the return on investment from switching is significant.

Using modern tools to simplify the vendor payment process can save businesses time and stress. Stripe Global Payouts lets businesses send funds from their bank accounts to vendors worldwide, with a simple recipient onboarding experience and multicurrency support.

How Stripe Payments can help

Stripe Payments provides a unified, global payments solution that helps any business – from scaling startups to global enterprises – accept payments online, in person and around the world.

Stripe Payments can help you:

• Optimise your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs, access to 125+ payment methods and Link, a wallet built by Stripe.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalise interactions, reward loyalty and grow revenue.

• Improve payment performance: Increase revenue with a range of customisable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorisation rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments or get started today.