What Types of Payments Can Be Automated?
Payment automation makes invoices go from received to ready-to-pay much faster than paper or manual processing. This frees up valuable working capital and can improve a business’s cash flow.
Less chance of errors means less waste and better record-keeping. This is especially important because according to the 2022 State of AP Report, vendor relationships are the most important for 71% of AP teams.
Recurring Bill Payments
These are payments a customer authorizes to be debited from their account on a regular basis (such as monthly). They can either be set up for the same amount each month, or a variable amount within a certain range. Examples include automatic debt repayments for mortgages and credit cards, or monthly fees for streaming services like Netflix and Hulu.
These kinds of payments can be automated, saving you and your customers time and hassle. When a client sets up an automatic bill payment for your product or service, you’ll ask them to provide their name, address, financial information, credit card type and the date and amount they want charged each month. Your system will then process the payment each billing cycle automatically, and your intervention is only needed if the customer wants to change their payment details or cancel the plan.
The subscription economy is booming, and offering automate payments recurring is a great way to boost your revenue streams, get paid faster, create more reliable cash flow, work more efficiently, improve reporting, and increase customer retention. Start evaluating solutions that automate your accounts receivable early, so you can implement them before billing bottlenecks cut too deeply into your margins. Also consider offering more than one payment option, as the more options you offer, the fewer excuses your customers will have to put off paying their invoices.
Purchase Orders
Purchase orders are a tool for managing recurring business purchases and establishing credit with suppliers. They can help improve accuracy for inventory and financial management, insulate companies from unpleasant surprises and facilitate fast delivery by requiring that funds are available to pay for goods or services before the PO is issued. However, if poorly managed they can also add a layer of administration that bottlenecks efficiency for smaller businesses.
Automating the PO process can simplify the work for your accounting team, reduce error risk, and improve transparency, security, and supplier relations. An automated solution can verify payments against ERP records, flag errors and exceptions, and ensure that the right people are getting the money at the right time.
The automated payment process can also make it easier to give suppliers real-time visibility into their transactions via a vendor portal. This can reduce the amount of time accounts payable staff spend on answering supplier queries and can improve your reputation as an accountable partner.
The automated process can help reduce the number of errors made during the payment process by automatically checking that the invoice quantities and prices match the PO specifications (as well as other factors such as contract terms and discounts). Once matching is complete, the automated system can initiate payment to the supplier using the payment method specified in the invoice.
Vendor Payments
Vendor payments are recurring money transfers that customers authorize to pay specific vendors on a regular basis. They can be scheduled to pay a customer’s mortgage, credit card installments, rent, electricity and water bills, cell phone charges, or other business costs. These automated payments are also used in B2B transactions to pay vendor invoices.
Often, a business’s accounts payable team is responsible for processing these types of vendor payments. Unfortunately, this manual process is prone to errors. Whether an error occurs during data entry, in a spreadsheet, or when reviewing an emailed invoice for payment, these mistakes can add significant lag time to the payment process and damage supplier relationships.
When it comes to reducing these errors, a good accounts payable automation solution can help. These solutions can streamline and automate the entire accounts payable process from purchase order issuance to invoice receipt and verification, payment approval, and payment execution. This can help a business save valuable work hours while improving its relationship with suppliers.
Payment automation can also reduce the risk of fraud. While it isn’t impossible to prevent fraud altogether, it is significantly less likely with an automated system. This can save a company significant time and resources that would otherwise be spent chasing down employees who are embezzling or wrongfully charging customers. In addition, it can help ensure compliance with regulations such as PCI DSS and GDPR.
Invoice Payments
If you’re not already automating invoice payments, you’re missing out on an instant productivity boost. By automating this process, you can significantly reduce the amount of time your accounts payable team spends on invoice payment processing by eliminating manual steps such as invoice capture, coding and approvals. In addition to reducing the burden on your accounting department, you can also improve supplier relationships by making payments quickly and accurately.
One way to eliminate manual invoice payment processing is to use an automated solution that offers automatic billing. This enables you to create a recurring transaction that automatically withdraws funds from your client’s account ahead of the due date. This will ensure that your clients never miss a payment deadline and you’ll avoid the hassle of having to chase after payments or pay late fees.
In addition, automated payment solutions offer greater protection against fraud and other security risks. A quality automation tool will have a strong set of authentication and segregation of duties, as well as granular visibility into the status of every transaction. This will help you identify any unusual activity and take corrective action immediately before it has a negative impact on your business or customer experience. It will also minimize the risk of human error, which can be a common issue in manual processes.
