Every year, Nvoicepay attends the APP2P Conference: the largest, most comprehensive event dedicated to accounts payable and procure-to-pay.
In a sure sign that payments technology is gaining traction in the market, Nvoicepay was invited to participate on a payment automation panel. The panel, “Payment Automation: What You Need to Know Before Investing in New Technology,” was moderated by Mark Brousseau, an independent researcher and analyst specializing in accounts payable and accounts receivable.
My fellow panelists represented a diverse selection of business payment options available to customers. In a lively and interactive discussion with audience members—whose companies are seeking to adopt electronic payment solutions—panelists broadly agreed on the following do’s and don’ts for making the switch:
Best practices when choosing a payables provider
Do: Think holistically about payments.
Ask yourself: “What would I do if I reinvented this process from scratch?” Think outside of payment types. Focus instead on operational efficiencies, risk (who assumes it?), and vendor enablement. On all fronts, payment providers should take on more manual work so their clients—AP professionals—can do less.
Today’s platforms consolidate all payments into a streamlined dashboard where AP can approve the entire payment run with a few clicks of their mouse. The platform then automatically disperses payments according to the vendor’s preferences.
Do: Build a business case for change.
The benefits of payment automation include lower costs, improved security, increased rebate revenue, and better management of DPO and working capital. Transition to electronic payments also means enabling AP to repurpose the time they have spent folding, stuffing, and stamping envelopes.
Do: Build a cross-functional alignment.
Automating payments is a low-impact project with most changes confined to AP, but procurement may have concerns about negotiated payment terms. Treasury also worries about security, risk, and float. Get everyone in a room together and collaborate to create a business case, making sure to address and resolve everyone’s concerns.
Do: Redefine fraud prevention and control.
For decades, check-signing offered some control, but automated processes have redefined payment security. Automated approval processes are personalized and configured for different approval levels depending on payment type and amount.
Some platforms even take on vendor data management entirely to prevent business email compromise and other types of social engineering schemes. This added protection averts internal staff from being scammed into changing payment data. Advanced platforms may even assume liability for successful fraud attempts.
Do: Have a strategy for approaching vendors.
Consider reevaluating your payment terms and offer more incentives—like a reduction in DSO—to create a mutually-beneficial experience for you and your vendors. To get the best use out of your payment automation solution, offer virtual cards before ACH. If you have formal terms in place, it can reduce the number of vendor inquiries for ACH and check.
Do: Get several bids.
Each bank and fintech approaches payment automation differently. Make sure you understand what your existing payment mix is so you can analyze your current spend against the offered programs. Then ask as many questions as you can. Educating yourself on your options will ensure that you find the best solution for your company.
Do: Automate payments before AP workflow.
A decade ago, AP automation took priority with solutions like invoice capture and three-way matching. That’s a more significant transformation and, therefore, a harder business case to make.
Adopting payment automation first cuts processing costs dramatically and increases rebate revenue. The subsequent savings can fund front-end automation and establish a seamless and affordable end-to-end solution.
What to avoid when automating payables
Don’t: Piecemeal it.
Banks have historically sold payment solutions in sections, so there’s a tendency to think that this is the only adoption method available. Many think: "I'll do a card program and see what happens. Then I’ll do an ACH program.” That’s product orientation. Today’s technology has a process orientation; it’s designed to optimize and integrate the whole process at once.
Don’t: Assume that vendors won’t take payment by card.
Vendors take card for a variety of reasons: convenience, security, and protection (such as making a chargeback if there’s a problem with a purchase). The key to maximizing card acceptance and rebates is simply to ask.
Don’t: Default to your current provider.
It’s easy to go with your bank because you have already established trust. But new technology is changing the way business payments are made—just as it changed consumer payments—and your bank may not have the means to work with the nuances in your company’s process. You owe it to yourself to survey the market before coming to a decision. Taking the time to thoroughly research solutions is cost-effective because it enables you to choose your long-term partner with confidence.
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