What Is Request-to-Pay, & Why Is It The Future Of Collections?
When it comes to customer collection, there are several methods of invoicing that are used. From the obvious paper invoice to the automated email reminders and account notices. But you may have heard of a new collection method recently. It's called request-to-pay (RTP). How does request to pay works? And why is it a good time to get on board?
Request to Pay is a new and more efficient method of collecting payments from customers. In this article, we will explain what Request-to-Pay is, how it works and why you should use it.
What is request payment or RTP?
Request to Pay is an online payment method that allows customers to pay their invoices using their credit card or eCheck right after they receive an invoice. The customer can also pay the invoice later by creating a payment request via email or SMS. This new payment method was introduced in 2019 by Xero and has been adopted by thousands of businesses around the world already.
Request-To-Pay is an attempt to address the problem of late payments. While sellers want to ship quickly, they often don’t receive payment for several days after the order ships. This causes delays in delivering products and receiving payment for them.
RTP platforms allow you to send invoices and accept credit card payments directly from your website. The invoice page looks identical to a traditional invoice: it contains all the necessary information about your products or services, including descriptions, prices and tax information. However, instead of sending paper invoices through snail mail or emailing PDFs, you can simply send customers their electronic counterparts via email or text message (SMS).
Is a request for payment an invoice?
Yes, invoices are used as payment requests, as well as tax and accounting documents.
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Request-to-Pay: a new way of paying your bills online
The European Payments Council (EPC) has been developing RTP since 2014 as part of its 2020 Vision project. The EPC's goal is to "make payments easier, faster and cheaper" within the European Union, by streamlining the payment process for businesses and consumers.
RTP will allow customers to send invoices directly from their bank account to their supplier with a single click. The system will also allow banks and merchants to share information about their customers' payment preferences.
Request-to-Pay is an answer to the growing demand for instant payments, which are becoming increasingly popular among consumers and businesses alike as they offer greater speed and convenience. The new initiative aims to provide businesses with an alternative payment method, which will allow them to receive payments from customers faster than before.
How Request-to-Pay simplifies business-to-business payments
As a business, you have probably experienced the frustration that comes with paying bills. It can be difficult to keep track of all your bills and payments, especially when they come from multiple vendors and suppliers.
The Request-to-Pay feature allows you to set up rules to automatically send out invoices and collect payments from your customers. You can collect credit card payments directly from your customers' bank accounts, or use our online payment portal for ACH or check payments.
Request-to-Pay can be used with any of the following:
- Invoicing: Send out invoices to multiple customers at once using the built in invoice template or your own custom template.
- Payments: Collect payments from multiple customers at once by sending them an invoice through email or through our website.
How does Request-to-Pay work with SEPA?
Request-to-Pay works in two stages: first, you request money from your bank or card provider; second, once the payment has been authorized, you can transfer it to your biller's account.
SEPA (Single Euro Payments Area) is a payment area in Europe that has been designed to make it easier for European businesses and consumers to use electronic payments. The SEPA project was launched on January 1, 2008, but the process of adoption is ongoing.
Request-to-Pay allows you to send invoices in SEPA format (CORE or ADIF 2.0) via email directly to your clients. Your clients can then pay those invoices online using their own bank account number, IBAN, and BIC/SWIFT code.
The process allows you to pay multiple billers at once by using just one single transaction between your bank or card provider and the EPC. This means that you no longer need to enter the details of each biller separately into the Request-to-Pay service. It also helps to prevent fraud, as you are no longer required to enter sensitive data such as account numbers or passwords.
SEPA Direct Debit isn't affected by Brexit. It's available in all EU countries, even those that aren't part of the European Economic Area or the European Free Trade Association (EFTA).
Payment options available with Request-to-Pay
|Approve Now, Pay Now||The creditor and the payer are in direct interaction. The request has a short life span.|
|Approve Now, Pay Later||The creditor wishes to obtain the payer's agreement in real time but gives the payer time to execute the payment.|
|Approve Later, Pay Now||The creditor wishes to allow time for the payer to validate the payment request. Once validated, the payment is automatically triggered.|
|Approve Later, Pay Later||The creditor grants the payer a period of time to approve the request and a longer period of time to make the payment.|
Why You Need Request-to-Pay For Your Business
RTP is part of a global drive to harmonise and digitise payments between businesses. Request-to-Pay allows businesses owners to:
- Reduce cash flow issues: If you're a small business owner, chances are that one of your biggest challenges is getting paid on time by your customers. This can lead to cash flow issues and problems paying bills on time.
- Increase sales: If you're having trouble getting paid by customers, it's likely because they don't trust you enough yet to send money before receiving the goods or services they ordered from you. Using Request-to-Pay can help build trust between you and your customers so that they're more willing to pay up front rather than waiting until after they receive their product or service from you.
- Reduce fraud: Credit card fraud is common in many industries because it's so easy for thieves to create fake accounts and chargebacks against real ones using stolen credit card numbers and identity theft schemes involving someone else's identity information like social security number or birth date.
- Time savings: Automated invoicing saves you time because you no longer have to print and mail invoices manually. You also won’t have to worry about late payments anymore because your clients will be prompted to pay their bills before any due dates pass by!
- Reduced paper waste: Request-to-Pay eliminates paper receipts. This reduces paper waste in businesses since fewer checks are being mailed back and forth between companies
In addition to reducing payment times, the added value of RTP lies in the creation of a permanent link between the invoice and its payment, since the invoice reference is included in the message. This facilitates bank reconciliation and accounting reconciliation.
For the beneficiary, Request-to-Pay is a way to take the initiative on their reminders, and keep complete transparency on the invoice approval flow:
For the customer, RTP offers an alternative payment solution, making the payment process easier and smoother by eliminating any steps that are not inherently necessary for payment validation.
Libeo––The Request-To-Pay Solution That Will Change The Way You Do Business
Libeo is a fully integrated and automated business-to-business payments platform, bridging the gap between invoices, payments, reconciliation and accounting. When paying an invoice on Libeo you can choose between the following options:
- Prepare planned payment
- Prepare a payment on account
- Indicate a non Libeo payment
- Request approval
- Put on hold
For safety purpose, all invoices imported into Libeo are checked at the time of import, in order to verify the information and detect duplicates. Once the invoice has been validated, you can ask for payment:
With Libeo, simplify the collection of your receivables:
- One single platform to manage and pay all your customers invoices
- Scans and sorts all of your invoices
- Reduces manual processing errors and secures payments to prevent fraud
- Digitization of your approval workflows
- Simple and secure payments without chasing bank account details or logging into your online banking
- Integration with several accounting tools
Here's your step-by-step guide to invoice processing automation
Invoice processing is a critical part of any business, but it can also be a time-consuming and labor-intensive process. That's why it's important to automate invoice processing as much as possible as part of a more global electronic invoicing process.Read full article