By Mark Pensirini
The pandemic spurred many realizations, including this one: the enterprise cash management process is broken.
Cash management is always important, but it’s certainly gotten a lot more attention in the past two years. As companies went into crisis mode, keeping a very close eye on cash became a top priority.
At the same time, remote work made cash management harder because so much of the payment process was still based on paper checks. Suddenly, all eyes were on the amount of time and manual effort required. The resulting lack of consistency, visibility and control were in plain view.
We saw AP professionals shuttling back and forth from the office to pick up paper invoices and check stock. AR professionals were trying to figure out how to get to the post office or lock box and get checks deposited to the bank. Invoices and checks could be sitting for many days before they could be processed.
The pain and urgency got some people to take action. Cash and paper check payments declined a whopping 16 percent year over year in 2020, slipping to 45 percent of B2B payments.* Automated Clearing House (ACH) payments rose above $10 trillion for the first time in history.
A lot of companies that had payment automation on their roadmaps finally implemented it. Corpay’s payment automation business has been around for about 12 years, and a third of our customers have signed up since the pandemic.
The use of checks should continue to decline. The Association for Financial Professionals (AFP) 2022 Payments Cost Benchmarking Survey found that 73% of organizations are now transitioning from checks to electronic payments. For publicly owned firms, the figure is 80%. But reducing check use is just the first step toward more effective cash management. AP teams still have to contend with multiple partially manual workflows for different payment types; error resolution, and vendor enablement and data management. Automating the entire payment process should be the ultimate goal. Not only does it give you more visibility and control, it frees up staff time to focus on it. Here are eight ways payment automation helps with cash management:
1. Reduced process costs. You’ll improve cash flow by reducing the cost of making payments. Paper costs get substantially reduced. Much of the printing, signing, stuffing, stamping and mailing is replaced by just a few clicks. All payments can be made in a single workflow, instead of the three or four your team is probably running.
2. Card rebates. You’ll be able to pay more vendors by card, generating rebates. That certainly helps with cash flow.
3. Less time fixing errors. Payment errors are expensive time wasters. Even though it’s typically 10 or 15 minutes to fix an error, it adds up. And it’s interruptive–you have to stop whatever else you’re doing and fix it. Voiding and reissuing checks, and all the extra time it takes to get money to the right place can really throw a monkey wrench into cash management efforts. A good payment automator will handle error resolution for you.
4. Less check fraud. Checks still carry the highest fraud risk. Your bank account and your routing number are right there–no phishing or hacking required. The last thing you need when cash is tight is to have money stolen.
5. Reduced ACH fraud prevention costs. ACH fraud is rising, mainly through BECs (business email compromise schemes). Effectively managing and safeguarding vendor banking data requires a lot of IT resources and staff time. Most companies don’t have the resources to do it effectively. Payment automators take on the fraud prevention effort on their customers’ behalf, reducing their exposure and giving them back resources.
6. Less time handling inquiries. Payment automators handle vendor and customer questions, further freeing up staff time.
7. Greater visibility. Cash management is so much more efficient when you can see the status of all your payments in real time, in the cloud.
8. More control. When you can pay electronically, and all it takes is a few clicks, you can time your payments with precision, rather than trying to manage check float.
The reality is that the enterprise cash management process has been broken for a long time. The pandemic just made it worse and put a spotlight on it.
Efficiency, visibility and control are the most important words in cash management. If you’re doing paper check processing, you could be doing so much better on all three fronts. Digital payment methods combined with process automation let you manage your money and your staff’s time better. It’s the ultimate in efficient cash management.
*2020 CRF-NACHA Survey on CRF Member Payment Benchmarks
Corpay is a global leader in business payments, helping companies of all sizes better track, manage and pay their expenses. Corpay provides customers with a comprehensive suite of online payment solutions including Bill Payment, AP Automation, Cross-Border Payments, Currency Risk Management, and Commercial Card Programs. As the largest commercial issuer of Mastercard in North America, Corpay handles over three billion transactions each year. Corpay is part of the FLEETCOR (NYSE: FLT) portfolio of brands.