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Improve payment processes with integration

By Donald Brown

For the KPBJ


You’ve probably heard the saying that there’s nothing good that cannot be improved on. In the changing world of payables, this rings particularly true. Today’s payment processes are impacted by several friction points that slow the process down. But as we look to tomorrow, emerging technologies are creating a payables environment that is increasingly more cohesive and conducive to improving the connection between buyers and suppliers.

In a perfect world, buyers and sellers would be able to seamlessly complete transactions using straightforward, automated processes. All elements of the buying process — including contract terms, logistics, insurance, remittance, payment options, currency and financing — would be transparent and connected within the process. 

While we’re making progress, today’s processes remain bogged down by an infrastructure that still requires too much manual intervention. The impact on businesses is twofold: they remain reliant on paper-based processes; and they are caught between poorly integrated systems that don’t communicate effectively between one another. 

Invoices continue to be received through multiple channels (mail, email, fax), which only increases the challenge of seamlessly connecting invoice receipts to purchase order matching, approval and payment workflow. 

Another point of friction many businesses confront is the lack of visibility into all areas of the buying process by buyers, sellers and their banks or financial service providers. Communication and dispute resolution actions related to purchases are often performed outside the buying process and rarely include all parties involved. This leads to time delays, mistakes and missed opportunities for all parties involved in the transactions.

Organizations need to understand the payment ecosystem, which entails two distinct sides with often competing objectives.

— Buyers procure a product or service, and they make payment to the seller. It is in the buyer’s interest to maximize time between procurement and payment.

— Sellers receive an order and deliver a product or service to buyers, along with an invoice to collect payment. It is in the seller’s best interest to minimize time between delivery and payment.

In most instances, organizations are both buyers and sellers, so the timing of payables and receivables is important to liquidity. Many organizations are moving toward electronic options that integrate with existing electronic payment options as a means to improve insights and efficiencies. The problem: this setup still lacks true integration and connectivity across the entire payment process.

New payment processing solutions are dramatically strengthening the connection between buyers and suppliers.

Payments solutions currently available simplify the exchange of documents in the procure-to-pay process, while new systems improve efficiency and reduce costs by removing paper from the buying process. Also, new electronic processes allow businesses to fully consolidate all payment types — check, wire, card, Automated Clearing House — into one file. This simplifies processing by combining payments into a single workflow that improves the speed and accuracy of payments that organizations make while freeing up resources to focus on more value-added activities. 

For example, a Purchase Card can enable businesses to streamline the payment process, reduce costs and take advantage of vendor discounts. A client of mine was using a brand name credit card, and the interchange for his vendor was roughly 4 percent. When they switched to our purchasing platform, the interchange to his vendor was decreased, which allowed my client to go back and negotiate better terms. The client was able to negotiate a 0.75 percent reduction in pricing because he was reducing his vendor’s costs.

There is still room for improvement. The true value will be realized when integrated payment processes are developed that relieve the “pay slow, collect fast” tug-of-war between buyers and sellers. The good news: these technological advances are on their way. Until then, organizations should continue to invest in collaborative trade and dispute resolution processes that are designed to strike the right balance to best suit the collective needs of both buyers and sellers.

 • Donald Brown is a vice president in KeyBank’s South Puget Sound District. He can be reached at 253-358-2499 or donald_x_brown [at] keybank [dot] com.

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