There are popular tools available to companies to automate their payment workflows, a presumably welcome relief to many accounts payables departments. Still, companies today tend to stick with what they know, making more than half of their payments by check.
“These are physical things that need to be printed, signed and mailed,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “That’s not only time consuming, but given the technology available, difficult to monitor and needlessly costly.”
Companies looking for cost and process efficiencies are moving to electronic services — integrated payables platforms, virtual credit cards — to submit and control payments.
“Integrated payables services make vendor payment delivery, settlement and reconcilement easy,” he says.
Smart Business spoke with Altman about the effect of payment automation on companies’ accounts payables departments.
How would you characterize companies’ rate of adoption of these payment automation tools?
The rate of adoption of payment automation tools has been slow to this point largely because these services aren’t core aspects of most companies’ businesses. It’s more a utilitarian necessity. Businesses prefer to focus on activities that generate revenue, so products and services such as payment automation tend to get less attention.
Payment automation tools eliminate much of the heavy lifting in the accounts payables process and create a one-stop shop that processes payments while keeping all data, regardless of payment method, in one place.
Why does there seem to be a hesitance to change?
An integrated payables platform is essentially a website with a secure login access designed specifically for vendor payments. It features a configurable workflow process to maintain separation of duties for more fraud mitigation. Reporting is available through the interface so as transactions are made, their status is updated.
Adoption rates are high with newer companies that aren’t entrenched in a way of doing things. With older companies, the challenge is really just resistance to change — they’re hesitant to take on something that seems like a project. Finance staffs are squeezed for time, so getting them to welcome a new way of doing their jobs just seems like a task they don’t have time for. Overcoming that inertia is often tough.
However, what companies don’t take into account is that the simplicity of the new system means integration can be done in a matter of days, not weeks. The interface is very straightforward and uploading payment data is simple.
How might the integration of payment automation tools affect the costs of payment workflow and security?
A paper-based check payment system has costs for senders, such as maintaining a printer with magnetic ink and its paper stock, the cost of the mailing supplies, postage, and also time.
The manual processes and workflow are, compared to digital methods, difficult to track and control. There’s often no audit trail, especially at the transaction level. With automated workflow tools, an audit trail is automatically kept for any action taken on each payment. It’s a meaningful improvement in terms of ease of use and cost of service. It frees up time for an AP staff to take on more value-added activities.
Adding to the movement toward electronic-based systems is the need to mitigate fraud. Any check that is written should be protected with Positive Pay controls, and integrated payables services automatically provide this protection. But migrating payments from check to virtual cards is really changing the security dynamic because virtual cards have little fraud exposure.
These cards have a designated shelf life and dollar amount. They have security features that prevent them from being used just anywhere. As an added benefit, moving payments to virtual cards also bring rebates to a company that could outstrip the costs of the former manual process, effectively adding revenue to the AP department’s budget.
Insights Banking & Finance is brought to you by Huntington Bank
