Breaking Down the Barriers to Payment Automation

by Jeff Pape 0

The vast majority of middle-to-large-scale organizations are now using electronic payments to at least some degree. In an August Paystream Advisors report, 27 percent of the organizations surveyed reported “significant automation investments,” and another 33 percent reported having at least “some” advanced technology. By contrast, only 4 percent said they had “no automation and no plans to automate.”

Even so, data as recent as 2012 shows that paper checks have yet to fall below 50 percent of business-to-business payments. In spite of all the investment being made in payment automation technology, paper has yet to retreat quietly into the night. In other words, when it comes to optimizing electronic payment tools, many organizations are not nearly as far along as they could be.

A number of impediments keep organizations from doing more with electronic payments — an unwillingness (or perceived unwillingness) among suppliers to accept e-payments; a lack of integration between e-payments and other back-office systems; difficulty verifying the correct payment receipt; and generally insufficient internal IT resources to devote to the tasks.

Organizations will not realize maximum financial and efficiency benefits from their epayment systems unless these barriers come down. Fortunately, that is beginning to happen. Let’s examine the obstacles one by one.

Suppliers May Be More Receptive Than You Think

When we at U.S. Bank conduct an Accounts Payable analysis with one of our clients, we consistently find instances of paper checks being used to pay suppliers who accept card payments. Sometimes we find one department paying a supplier by check while another pays the same supplier by card. With one recent customer, an outreach effort by our Supplier Enablement team yielded no less than 80 card-accepting vendors whom the customer had been paying by check for years, creating unnecessary work and missing out on significant rebate opportunity.

The lesson to be learned is that change in the payment landscape is rapid and ongoing. What a supplier may have said about not accepting cards in the past – even the very recent past – may be different today. If you as a buyer haven’t undergone an Accounts Payable analysis with your banking partner lately, ask for one now.

Advances in IT Integration

The technical challenge of integrating a buyer’s Enterprise Resource Planning (ERP) software with that of its payment provider can discourage organizations from automating. Many simply don’t have the IT resources to invest in creating the multiple file formats and custom interfaces needed.

Banks and other payment providers recognize this and are tackling the issue head on. Most offer “data mapping” services that do most of the heavy lifting of integrating among the various ERPs, home-grown and legacy applications, spreadsheets and flat files. Such “turnkey” solutions often require little to no investment from the client, other than perhaps a commitment to a minimum level of annual spending volume.

U.S. Bank advanced IT integration a giant step further with the July 2013 introduction of the SAP Consolidated Payables Link for U.S. Bank application. Customers who use SAP as their ERP provider no longer need to develop separate formats and custom interfaces between U.S. Bank and their ERP system. They can download an app from the SAP Marketplace and let the app automatically format all the necessary elements for ACH, wire, check or virtual card to the required specifications for payment. This reduces the cost of getting started, and the time it takes to do so.

Easing Reconciliation Woes

Single-use accounts with exact authorization controls are another recent development on the e-payments landscape. Such tools ensure that buyers have complete control over the amount they authorize for a payment – down to the penny. A seller cannot take a penny more – or a penny less – than what is authorized.

At first blush, it wouldn’t seem like cause for complaint when a seller takes less money than the buyer intended to pay them. But the time and cost of reconciling unmatched payments after the fact can be a major headache for buyers. For example, if a buyer sends an electronic payment for $100, and the seller decides to take just $80 because of a $20 credit with the buyer connected to a completely separate transaction, it might even up the books for the seller, but it leaves a discrepancy for the buyer.

You can’t cash a check for less than what’s written on it, and you shouldn’t be able to do it with electronic payment, either. Exact authorization controls allow buyers to work with their suppliers on such issues before the payment happens, rather than trying to fix mismatched payments after the fact.

Never a Better Time to Automate

With more and more suppliers accepting e-payments, with innovations empowering buyers to take greater control over their processes, and with technology barriers falling by the day, payment automation is poised to accelerate in the next three years. For organizations looking to migrate more transactions to their card programs, no less than for organizations considering their first move in that direction, there is no better time to act than today. Take the first step: contact your banker.

Jeff Pape is a senior vice president whose responsibilitiesinclude leading the strategic development of commercial cards, emergingpayables products and supply chain finance solutionsfor U.S. Bank’s business-to-business customers. Jeff has more than 18 years’experience in the payments industry, including roles in product management,relationship management, operations, technology and business development with U.S.Bank. He graduated from the University of Wisconsin – LaCrosse, where hemajored in Finance with a concentration in Economics. Contact Jeff at or 612-973-1405.

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