Freeing up working capital is an important priority to most business owners, but admittedly, accounts payable is not the first place they look. While AP staff are familiar with OCR and invoice scanning tools, it’s ultimately payment automation that completes the procure-to-pay cycle.
Obstacles to automation
The number of vendors a company pays creates a challenge for AP staff to house correct vendor information like addresses and bank account numbers. What’s more, optimizing vendor payment type proves an equally time-consuming task as ACH, credit cards, paper checks, and wire transfers are all captured at different points along the AP workflow.
Changing solutions landscape
Thanks to the new era of electronic payment (ePayment) solutions, automating the payments process via cloud-based software is not out of reach. Many of these hosted solutions eliminate the need to protect sensitive vendor data in-house or invest months into a new technology initiative that is expensive or incompatible with existing ERPs.
8 Benefits of payment automation
1) Customer service
Vendor enablement services help companies move at a faster speed in AP while accommodating both vendor and customer needs.
2) Cash capability
Epayment solutions enhance cash flow by freeing up resources to allow investment in high(er)-priority areas instead of wasting money on late payments, mailing costs, and adding temporary headcount.
3) Automated early pay discount
This brings us to the topic of early-pay discounts!
Early pay discounts free up cash through a predetermined agreement with a supplier who is willing to accept an invoice payment at a discounted rate for payment funds delivered before the due date.
4) Automation of deductions
The less manual the task, the better. This includes searching for deductions and exceptions. This way, AR staff is handed exactly what they need.
5) Enhanced collection activity
Collection efforts are always a pain. Automation efforts help optimize this process by eliminating time spent tracking down payments via phone.
6) Lockbox integration
Ditch paper processing once and for all with an electronic lockbox service that provides payment visibility and consolidated remittance data. The lockbox gives customers a single place to view payment data and makes it easily accessible to Accounts Receivable.
7) Single receivables processing hub
The various data capturing points in an AP back office can be overwhelming. A single receivables processing hub alleviates this problem by aggregating payment types and capture points into one cohesive workflow.
8) Analysis and reporting functionality
This feature may be the best of all. Providing trend analysis and data reporting is an essential tool in the AP staff’s arsenal for projecting cash flow. The ability to export data and quickly acquire payment information is a coveted tool useful for financial reporting purposes and quick reference.
The benefits of automating vendor payments extend far beyond this list, but it provides a window into the opportunities that lie in taking a proactive approach in cost-cutting and automation initiatives.
About the Author
Chris Doxey, CAPP, CCSA, CICA is an independent management consultant providing Internal Controls and Business Process Best Practice Solutions. She has extensive experience in procurement, accounts payable, internal auditing, internal controls, Sarbanes-Oxley compliance, payroll, logistics, financial systems strategy, and financial integration at Digital, Compaq, Hewlett Packard, MCI, APEX Analytix, and Business Strategy, Inc. She was recruited to assist MCI (formally WorldCom) recover from their internal control challenges. She has a bachelor's degree in English, a bachelor's in accounting, a master's in business administration, and a graduate certificate in project management. Chris has written numerous articles and published two handbooks: AP Leadership Skills and Implementing a Controls Self Assessment Program for Your Accounts Payable Department.More Content by Chris Doxey