The pandemic revealed the need for greater resilience. But to truly transform A/P will require extensive automation, more electronic payments and a digital experience.

When the pandemic struck, it immediately paralyzed the ability to print and mail critical check payments at companies that relied upon printing equipment and check stock residing in the office. With Accounts Payable (A/P) staff suddenly forced to work from home, some businesses outsourced these traditional disbursement duties to their banks on an emergency basis.

Now, after experiencing first-hand how check outsourcing keeps payments flowing and allows A/P staffers to engage in more strategic activities, many businesses won’t go back to having their staff print and mail checks again.

Greater resilience to deal with disasters is just the beginning of what companies can accomplish if they use the pandemic as a pivot point for transforming the A/P function.

A/P automation and operational efficiency

Check outsourcing is one way of achieving greater operational efficiency. However, there is much more companies can do if they work to remove paper from payment processes and fully automate A/P.

“It all starts with the receipt of invoices,” says Robert Laughlin, vice president and A/P automation services senior product manager at U.S. Bank. “For full A/P automation to become a reality, companies need to participate in electronic invoicing and take advantage of the growing complement of electronic payment methods.”

A simple strategy for automating outgoing payments is to use a bank’s integrated payables service. Check printing outsourcing is often a component of these services. A company sends its bank a file with all the information needed to print and mail checks for certain payments — and details about other payments the company wants the bank to initiate using electronic options such as the Automated Clearing House (ACH) network, wire transfers and new, faster instruments including RTP® payments.

“The value of integrated payables is that companies don’t have to maintain separate processes for all of the different payment instruments they want to use,” Laughlin says. 

The convenience of digital Accounts Payable

Companies can also strive to infuse their A/P operation with digital tools that increase convenience. “Going forward, companies will have the opportunity to manage their businesses digitally and with great flexibility,” says Seth Blacher, senior vice president and product head of Global Payables.

A digital experience no longer only means accessing a bank portal, Blacher says. Today, digital can encompass activities ranging from accessing payment data via an online cash management platform or an application programming interface (API), to setting up new banking services, making decisions about payments from an ERP system, or “pinging” a bank for the status of a payment. All these digital options give financial professionals timesaving, do-it-yourself (DIY) capabilities. 

Secure A/P against payment fraud

The rising number of business email compromises and other payment fraud scams is a continuing reminder that security must remain paramount. As you retool your A/P operation for the future, also focus on fraud prevention.

As you adopt electronic payment capabilities, look for solutions where your bank can offer secure storage of sensitive vendor data such as bank account and routing numbers. Banks can also perform real-time account validations to ensure the account owner is truly tied to the vendor bank account on record.

Combining these security capabilities with another emerging solution, intelligent payment routing, drives the highest level of payment efficiency and security. With intelligent payment routing, a company sends a file of payment information to its bank and the bank automatically determines which method to use for each payment. Intelligent routing decisions are based on preferences established up front by the payer around factors like speed and cost. 

Optimize working capital with electronic payments

In difficult economic times, companies must focus on holding on to cash as long as possible. An A/P unit operating at a more strategic level can support this effort by using certain electronic payment types.

A good example is initiating more commercial card or virtual card payments. By paying with a card and taking full advantage of the credit card billing cycle and grace period, a company can keep its money several weeks beyond normal payment terms.

RTP payments, which deliver good funds in near real time, can be another strategic A/P tool. By using an RTP network member bank, a company can hold on to cash by waiting to make an RTP payment on the payment due date or the last day of eligibility to earn a prompt-pay discount. 

Leverage rebates to enhance profitability

Another goal of your A/P transformation can be to turn Accounts Payable into a profit center. An important tool for accomplishing that is rebates.

Through rebates, card payments have for years helped A/P departments generate a revenue stream for their companies. What’s new is that some banks are beginning to offer companies the ability to generate rebates on ACH payments. That’s a game changer, since not every supplier is willing to accept cards due to interchange fees, but many that don’t take cards will accept ACH.

It’s not unheard of for a company to generate enough rebate revenue to cover most or all the costs of running the A/P department. 

2020: A catalyst for improving A/P operations 

In the COVID-19 era, companies have had to adjust their paper-based payment processes, and many are looking to use the experience of 2020 as a catalyst for transforming their A/P operations. While the initial priority has been ensuring there will be no delays in critical payments when the next disaster comes calling, treasury and A/P managers have an additional and much larger opportunity to elevate the strategic value of Accounts Payable.

Manage transactions and integrate new technologies to optimize your cash flow and mitigate fraud risks. Learn more about how A/P automation can solve payment challenges with an invoice-to-pay solution.