Are B2B payments costing your brand time and money? Chances are you may still be dealing with a lot of paper checks and manual processing. If so, your business needs to upgrade to an integrated payables solution right now.
What is Integrated Payables?
Integrated payables is a method that streamlines the payment process by allowing businesses to send all vendor payments as one secure, online payment file to their bank, who then processes and distributes the payment based on the instructions provided by the business.
This provides benefits and cost savings to both the payer and payee. Some of the reasons a company decides to implement this process are to lower and control operational costs and free up internal resources.
Depending on the customer’s preference, these disbersements can be made via:
- Check printed and mailed
- Virtual card
- Wire transfer
The payment methos depends on which solution works best to meet the needs of your business and vendors.
What are the Benefits of Integrated Payables?
Integrated payables streamlines treasury management by consolidating the payment process into a single step. A company can maintain complete control over funds and instruct the bank when to release transactions. This prevents fraud by allowing for:
- Dual control over file processing, transaction review, and approval
- Matching checks issued against checks presented
- Debit protection for Automated Clearing House (ACH) payments
An integrated payables solution also reduces costs by processing everything through the bank. This is much less than processing them internally.
This type of cash management allows a business to extend accounts payable by scheduling payments to post on their due date. It also enables a business to take advantage of early payment discounts by paying early or extending terms. This, in turn, will bring more positive cash flow to your bank account.
A robust integrated payables solution will include an online web portal for vendors that allows them to view payment and remittance details for ACH and virtual card payments. Vendors receive an email notification when payment is made through the self-service portal and will have immediate access to the payment amount and purpose.
With online management, a business can also view archived (historical) transactions through a secure portal. With immediate access to this type of data, a web portal can improve vendor relationships by reducing disputes and payment inquiries.
Improve Cash Flow
Leverage automation to reduce the payment processing turnaround. Eliminating manual processes means all payments are now handled electronically. Checks post faster to the account and give businesses a more accurate view of current cash flow. It will also place your company in a better position to take advantage of early payment discounts.
Many astute brands are changing the payment process from check to virtual card simply to take full advantage of these discounts and benefit from an extended Days Payable Outstanding (DPO). This helps to improve working capital management.
When the bank is processing and mailing all of a company’s checks, the burden is lifted from the AP department. Electronic payments streamline the process that results in faster and more efficient payments. Employees never have to set aside time to print and mail checks.
Additionally, a company won’t have to worry about the additional cost of postage. An integrated payables service provides address cleansing and postal sorting, which produces the lowest possible postage costs.
Moving accounts payable disbursements to an automated system means you can easily review and approve transactions. This reduces the risk of check fraud and increases overall security.
When a business wants to expand but cannot afford to hire more help, they must consider automating processes. Money spent on a software platform now can easily be recouped in labor costs later.
An integrated payables service is a way for a business to manage the payables process without increasing expenses. Outsourcing payables eliminates the need for more internal resources and allows management to focus on driving growth.
The Challenges of an Integrated Payables System
Even though this is an optimized payable process, there are still some challenges to these types of payment solutions. Many banks require companies to provide a specific file format. This places the burden on the company to align its systems with the bank.
Additionally, getting internal buy-in from stakeholders can be a difficult process. Especially if everyone is used to the current legacy system. Do not risk losing the relationships you have built with existing banks and payment partners.
Integration may also require more IT resources than what is available. Older ERP systems may not be able to even accommodate an IP process.
One way around these challenges is to find a bank that already aligns with your accounts payable system. If they provide a file format you already use, this can save a lot of time and money.
What Businesses Benefit Most from an Integrated Payables Solution?
If you run a business that currently uses multiple payment methods/payment types, you may be an excellent candidate for an integrated payables solution. In addition, if you are considering moving away from paper checks to an electronic system (like virtual cards) this is also a strategy to consider.
An effective bank can help analyze the payment trends of your current vendors. Who pays with what? How long does it take? This data can show a company how many of their vendors use virtual cards to access possible incentives like rebate programs and early payment discounts.
This creates an opportunity for a better transaction process and to improve business relationships. That’s because you are using a method of preferred payment that is cost-effective and beneficial to both parties.
Corporate payments do not need to be complex or tie up internal resources. Staying in line with competition means switching to a digital system sooner rather than later. This is where an effective integrated payables solution becomes relevant.
Although the upfront costs of implementing a new solution can be steep, the overall payoff is saving time, money, and optimizing business growth.