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Education

ments are sent to suppliers. This may occur once a
batch of payments has been authorized in the system. Payment scheduling capabilities
Some providers require the FBO account to be pre- give businesses control over which
funded, often at the beginning of the month. This can
make cash forecasting more predictable. vendors get paid and when, based
on available bank cash, invoice due
Solutions that use direct debit take funds from the
business's account only when payments are made to dates and available
the supplier. Timing varies by payment method, for early-pay discounts.
example: ACH payments are debited once the ACH
credit is initiated (see https://tinyurl.com/2tut98y4);
check payments are debited when the supplier cashes
the check; virtual card payments are debited when period, and suppliers receive payments more quickly.
the vendor processes the card (see https://tinyurl.com/ For instance, ACH payments reach vendors within
y84c5yyz). This approach allows businesses to hold two business days, while virtual cards can be sent to
onto their cash longer compared to the pre-fund- vendors within one hour of authorization. But that
ed intermediary account model described above. doesn't necessarily mean payments must go out as
soon as they're authorized.
2. Payment timelines: AP automation solutions that
use FBO accounts reduce the business's control over Payment scheduling capabilities give busi-
when money leaves the FBO account and gets sent to nesses control over which vendors get paid and
vendors. Accounts debited upon payment authoriza- when, based on available bank cash, invoice
tion typically require those funds to clear before pay- due dates and available early-pay discounts.
ments are disbursed to suppliers. In some cases, the
solution provider is making money on the float. 3. 1:many versus 1:1 reconciliation: With intermedi-
ary accounts, accounts are debited in one of two ways:
With direct debit, there is no fund clearing or float by pre-funding the account or by a lump sum for the

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