Optimizing Payment Processing with Automation

Payment processing with automation

The payments landscape is transforming at an astonishing pace, creating space for rapid economic growth in small to medium businesses. Efficiency, cost-effectiveness, security, analytics, accuracy, and relationships with suppliers are all enhanced when businesses shift into accounts payable (AP) workflow automation.

Payment processing

What is payment automation?

Essentially, payment automation is a seamlessly integrated business tool for paying vendors using electronic payments. Instead of the accounts payable department handling manual invoice processing and associated payments (which is slow, tedious, and has the potential for human error), they are freed up to become a hub of financial data and cash flow management and be a dynamic and strategic growth partner in the business. A typically slow and inefficient process becomes optimized and streamlined.

All AP processes begin with AP software—not an employee—processing invoices as they’re received; first scanning the information (regardless of format) using Optical Character Recognition technology. Printed characters are converted to digital text, turning scanned documents into editable text files.

The data is then automatically extracted, collated, reviewed for inconsistencies, and either approved for payment or routed to the correct departments for further review and approval. Invoice receipt, routing, matching, and coding all happen without unnecessary human intervention. Intelligent and intuitive coding means the software double checks for any errors right from the start.

The next step is remitting the payment, which is another fully automated process, often using Automated Clearing House (ACH). ACH is a system for the instant virtual transfer of funds from one bank account to another. Payment automation software seamlessly verifies and securely stores the client’s banking information, making the transaction both immediate and risk-free. The invoice has been paid on time, the data is centralized and visible, both time and money have been saved. 93% of payment processing functions can benefit from automation, with the percentage of tasks able to be automated moving swiftly upward as transactions progress from the source to contract stage, through the procure to invoice stage, then finally to the invoice to pay stage - which can be up 93% fully digitized.

How will automation software change payment processing?

In the past, AP team members would need to be hands-on at every step of the invoice remittance process. Manual processing of invoices is, undoubtedly, slow. There is room for human error; data entry mistakes, paper checks, duplicate or missed payments, difficulties with reconciling transactions, leading to less-than-ideal relationships with vendors and financial penalties for late payment. Time spent responding to vendors' queries, even entering new payees into an existing system, is time that could be used to innovate, drive growth, and improve the bottom line.

Your staff are your most valuable asset. Unfortunately, when manual processes lead to errors, AP departments are often the ones who must answer to the late fees and penalties incurred. The necessity of processing invoices as they come in takes away from the more important big picture - the strategic direction of the company and driving growth and efficiency. Take away the routine, often tedious demands, the bottleneck of invoices on desks, the potential for said invoices to wind up on the wrong desk, and your skilled staff can focus their energies on more profitable (and stimulating) tasks.

The cost comparison of an automated electronic transaction with a check is significant and should be considered. The median cost of processing a check transaction is $3, an ACH between $0.26 and $0.50. Then consider the labor cost eliminated when the task is automated.

Take a small to medium business that manually processes 100 invoices per month, at a processing cost of approximately $15 per invoice (cost of labor and transaction fees in. Compare this with a business of the same size, with the same number of invoices, but a streamlined automated payment system at a cost of around $5 per invoice. $1500 vs $150 per month is a startling cost savings.

Among the many advantages of adopting payment processing with automation is the inevitable improvement in relationships with suppliers and vendor relationships. Confusion and errors with payment amounts, payment methods, due dates, and transaction status’ can result in a great deal of time spent fielding emails and phone calls solving these problems. A portal within your Automated AP software allows real-time access to the status of each transaction, eliminating all ambiguity. Supplier satisfaction increases, as shorter payment cycles become the norm. Time is money. The more quick and efficient the process the more return on investment, the faster suppliers get paid, the more growth potential for all parties involved.

Accounts payable automation solutions—simplifying cash flow for B2B payments

The instant availability of detailed financial data that comes with a payment automation solution provides real-time data businesses can use for forecasting, and to improve their accounts payable processes, efficiency, and payment strategies.

How is your organization spending money? Who are you spending money with? What does your cash flow look like from month to month? Having this information clearly and concisely available opens the door to any number of strategic tools to help optimize cash position—potential supply chain financing and dynamic discounting for example. When your invoices are always paid early, and you have easy access to detailed cash flow reports, relationships with vendors are most certainly solidified, discounts are available, and the reputation of your business grows.

But that leaves out companies that need to offer net terms in order to either secure contracts or close higher sales (or both). Many businesses just won’t consider buying from a company that doesn’t offer net terms. That’s where Resolve comes in.

Coupled with accounts automation solutions, Resolve offers complete net terms and credit management to B2B organizations. By conducting quiet credit checks that don’t impact a company’s credit rating (or require any information from them), Resolve provides businesses with accurate information on what net terms to offer (30, 60, or 90 days), and what credit limit is ideal for that customer.

That’s where automation really starts to kick in. Customers can log into their account, see their credit limit and net terms, and make payments by credit card, bank transfer, or ACH payment that are processed automatically. Resolve also puts cash in the bank, fast. Each approved invoice is paid out—up to 90%—within one day. This allows businesses to solve their cash flow challenges while still facilitating net terms for their customers.

Data security

Security and fraud prevention with AP automation

Checks are one of the number one targets for fraudsters. The AFP Payments Fraud and Control Survey reported that 81% of companies were the victim of payment fraud in 2019.

Manual processing of accounts payable creates opportunities for data breaches—an automated system eliminates these opportunities entirely. Automated payment processing software enforces end to end compliance; irregularities are immediately flagged for attention and simply cannot slip through the gaps. Invoice matching logic ensures purchase orders, invoices, and payments are all reconciled. Notifications, prompts, reminders, and alerts ensure accountability at every step.

The use of Automated Clearing House for disbursement of funds uses verification and storage methods that protect the banking information of customers, keeping data completely secure. The likelihood of fraud is significantly reduced, without slowing down the payment process—in fact, it’s faster than ever before.

Streamline accounts receivable

In the same way, using automated software for accounts receivable means payments coming into your business are also handled quickly, easily, and paperless.

Software is able to reconcile incoming payments with invoices, painting a crystal-clear picture of who has paid you, for what, and when. Large volumes of payments can be automatically reconciled, and orphan transactions eliminated. Again, this frees up your staff to work on more valuable projects while improving supplier relationships.

Transitioning to automated payment processing

Concerns and questions about the complication and cost of transitioning to an automated payment processing system are common, especially for companies that have always used manual accounting systems. As is doubt about the associated security risks.

Adopting automation does not mean re-building your AP system again from the ground up. The right software for your business will sit atop your existing ERP system and work with it, not replace it. Your data is consolidated, your end-to-end accounting is seamless, and any gaps are filled.

Costwise, when you take the enormous savings into account, there really is no argument against harnessing this technology to transform your business. The ability to make and accept digital payments while eliminating human error (like the risk of duplicate payments), and streamlining your accounting is also compelling.

Driving Growth

With the increased productivity, improved morale of talented staff, and the clear insights provided by an automated system, the doors are opened for businesses to truly cement their spot in a competitive marketplace and surpass their competition.

Thanks to so much information literally at their fingertips, AP professionals are in a unique position to drive exponential growth. Businesses who are utilizing these skilled professionals to innovate and evolve are destined to be the leaders in their fields, whilst those who refuse to embrace the constantly advancing technology available will be left behind.

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