In today’s business landscape, departments across every vertical are pressured to do more with less. When it comes to back-office functions like Accounts Payable (AP) and Payments, the temptation to combine the two processes and technologies may initially seem like a good investment opportunity. But those of us in finance very well know, you should never have the same person enter the invoice be the same person who approves the invoice — and then also be the same person who cuts the checks or processes payments. The same goes for Accounts Payable and processing payments.
Here are the benefits of taking an agnostic approach to Accounts Payable and Payment technologies:
1. Maintaining Payment Processing Freedom
It’s not uncommon for businesses to switch from one payment type or processor to another. Payment methods are continuing to evolve and periodic changes may tigger an organization to switch processing providers. The capability of maintaining freedom is key. Whether it is a desire to increase controls, take advantage of credit card rebates, or maintain control and flexibility over payment methods.
2. Payment Method Flexibility
Oftentimes, a business will look to cut costs by offering additional payment methods or purely switching from one payment provider to another. This is frequently the case when supplementing or moving from paper checks to digital payments methods like ACH (Automated Clearing House) direct transfers, or even e-checks.
Another instance when an organization changes payment providers is when switching from a Business Card to a Corporate Card or a Purchasing Card. According to a recent study, 73% of organizations stated they used purchasing cards for their B2B transactions. These markers send a clear message and tell us that flexibility in payment methods is a cost benefit. This is not only for the seventy-three percent in this survey, but also for any keen finance department.
3. Best Rate Advantage
Networks like Mastercard and Visa are known to offer competitively low interchange rates for businesses that include supplementary line-item data on their card transactions. This is especially the case for Level 2 or Level 3 cards which on average offer lower rates by simply providing more details for each transaction.
On the other hand, fixed interchange rates are regulated by the Federal Reserve and these rates change twice a year; first in April and then again in October. The Fed rate changes directly impact interchange costs which the issuing bank offers. The amount will vary given the hundreds of different card options available.
By having lower interchange costs, the decision to process payments through credit cards is not one to be ignored. The key takeaway for businesses is to keep their Payment Processing and Accounts Payable technologies separate to ensure they are free to change providers when opportunities to cut payment costs arise.
4. The AP and Payment Technology Users
Take a look at your organization and identify the number of employees authorized to process invoice payments. You are likely to find that it’s less than a handful. Businesses operate this way for a reason and it’s a custom to put these internal controls in place to mitigate the risk of fraud from having too many hands in the pot.
Then if you take into consideration how many employees touch an invoice, you are likely to discern that invoices touch every department, including Accounts Payable. This is the case because each department has a budget to work with to meet their business goals, and vendors are a part of a business that enables them to do so.
It may sound like pure intuition, but the cost of re-training an entire organization over a change in payment providers instead of a select few just doesn’t add up. The best practice here is to identify agnostic solutions for your unique businesses needs. Starting with a standalone AP solution that enables your entire organization to be more productive without the need of re-training if you switch payment providers. Then it’s equally important to spell out the payment services which cut payment costs and doesn’t force your entire organization to learn a new system every time you switch payment services.
5. Accounts Payable and Payment Fraud Mitigation
Business fraud comes in many shapes and sizes but the kinds that come from within can be mitigated through segregation of duties.
A good example of this comes from the now former Accounts Payable Clerk at TCAT (Tompkins Consolidated Area Transit) in New York. The TCAT clerk was responsible for cutting checks and managing their Accounts Payable system. According to The Ithaca Voice, the employee was able to clear $250,000 over 4 years until she was caught. As previously mentioned, it’s not a best practice to allow the same person to commit the crime have the same duties which enable them to conceal it.
When segregating your Accounts Payable and Payment processes, you still want both to have the same data and financial visibility, but not the ability to conduct duties in both roles. Look for solutions that provide audit trails for both invoices and bill payments.
Moreover, technologies that offer intelligent AP or payment solutions are even better because they leverage AI (Artificial Intelligence) and machine learning. These solutions execute and automate audits while also enriching your financial data. Which in turn, mitigates the risk of both internal and external fraud. The added benefit from additional information in your systems is that it also reduces the chance of duplicate payments.
6. Full Procure-to-Pay Integration
Ensure your Accounts Payable provider works with your Procure-to-Pay (P2P) process if it includes an accounting or ERP (Enterprise Resource Planning) system. This also goes for your Payment Processing provider. Both will need to work together to ensure control over your P2P process. This agnostic approach should provide your business with more freedom in the case of an unsatisfactory vendor, or from rising interchange rates.
From there, identify solutions offering full P2P integration that work with your process. This will provide stronger controls and minimize the risk of internal AP or payment fraud. While also enhancing visibility and improving P2P productivity.
Interested in learning more about Accounts Payable solutions that work any P2P process and ERP system? Contact us to learn how Stampli allows you to keep your AP process in place, even as your financial systems change.
Blog was written by Evan Vuckovic, Marketing Manager at Stampli.