One of the first things you have to do when you start a business is to pay people and vendors. The easiest way to do this is by check. All you need is a bank account and some checks with your information printed on them and you’re off and running. There might be a better solution but in a growing company, accounting isn’t really top of mind for technology projects. There are usually bigger fish to fry and AP is one of the last things on the scalability plan.
Then one day, you look up and you have boxes and filing cabinets full of paper everywhere—so many that you’re thinking about renting a storage space.
Not only that, you’re faced with the prospect of hiring more people just to prepare checks, stuff them into envelopes, and mail them. Sure, you’re making some ACH and card payments because your vendors insist on it, but that just adds additional manual workflows with new vendor enablement and information management requirements.
Growing pains in AP
What started as a fast, easy way to get AP up and running becomes more and more painful as you go from a few hundred payments a month to tens of thousands. Researching failed payments becomes very time consuming. It gets even more painful when you have to do audits.
It often takes a merger or acquisition, a change in management, a procure-to-pay transformation or some other driving force like the need to prepare for an IPO for companies to finally focus on AP and payments.
It reminds me of when somebody's sick and they limp along, waiting until it hurts really bad to do something about it. Then when you get it fixed, you feel so much better and you realize just how bad the situation really was. That’s often the case for companies when they finally automate payments.
To the cloud!
The good news is that payments are now one of the easiest things to automate to help AP scale. Today’s cloud technology makes it much easier than most organizations imagine to manage a growing number of vendor payments, without growing the accounting and finance department.
Since AP is usually one of the last places for technology investment, most people are aware of the benefits of cloud solutions, but haven’t actually experienced them yet. It’s a big mind shift to go from thinking, “We have to go from Lawson 10 to Lawson 11 and it's going to take us four months to do it," to believing there’s a solution that you can implement in a few weeks and that is updated instantly without any effort on their part. But this is truly the case with cloud and SaaS solutions.
Integrating a payments solution can be accomplished within a few weeks without burdening IT, and it often pays for itself with the savings from making the whole process electronic and with increased credit card rebates. This is not just a scalability initiative. It’s also a cost-cutting initiative.
Move over banks
The other thing many people aren’t aware of is what technology companies are doing in B2B payments. Traditionally, AP has looked to their bank for help with payments because for a long time, banks had the only electronic options—ACH, credit card, and wire transfers for domestic and cross-border payments.
The problem is that the only electronic part of these payment options is the movement of the funds. Preparing the files to transmit payment through the bank’s pipes and then reconciling and following up failed payments on the back end is all manual (as is most of the effort to enable vendors for electronic payment and keep their information up to date). Really you’re just shifting processes, not improving them, and that’s not scalable.
Blind loyalty to business banking relationships is starting to erode as cloud-based fintechs introduce new technology and service offerings to the market. These companies use existing, regulated bank pipes to move funds, but they also offer a single, streamlined workflow for all payments—even cross-border—on the front end, and full visibility into payment status on the back end. That helps AP cut down on time spent answering calls and emails looking for payment status updates.
Fintechs are also using technology and people to provide all of the payment support services that can eat up so much AP time in a growing company. Bank payment programs are no longer the only way, or even the best way, to do electronic payments.
The savvy CFO
CFOs today are charged with not only scaling the business, but with making their organizations more strategic. Technology as a strategic enabler will help them go faster and free up staff's time to do higher value work that supports rapid growth, instead of mundane and monotonous tasks.
If you’re looking to grow, there's an opportunity to use technology as an accelerator any place where you’re doing a process over and over in the same slow, antiquated way. Payments fit that bill. AP can do more with the same headcount, cut paper processing costs, increase rebates, and free up brain power to work on more strategic things such as cash forecasting or invoice discount programs. Cloud technology can take payments from painful to painless in a very short time frame, making it a no-brainer for any company looking to scale.
About the Author
Tana is the Co-Founder and Senior Vice President of Nvoicepay. With her team, she helps to transform accounts payable departments from cost centers into strategic contributors.More Content by Tana Law