Many businesses still face challenges with manual payment processes, leading to increased costs, inefficiency, and vulnerability to fraud risks in B2B transactions. Moreover, traditional paper-based accounts payable procedures consume valuable time that could be utilized for more strategic activities aimed at enhancing overall business profitability. If your company is grappling with these day-to-day accounting challenges, considering a switch to an integrated payables solution could be a beneficial upgrade.
Integrated payables serve as a B2B payments solution, automating and simplifying payment procedures. A suitable integrated payables system holds the potential to save your business both time and money, while also protecting against fraud risks. This article aims to elaborate on the advantages and potential hurdles associated with integrated payables solutions, aiding you in selecting the most fitting solution for your business needs.
What is Integrated Payables?
Integrated Payables is a streamlined payment process for accounts payable and finance teams by automating and integrating all payment types into a unified, streamlined payment system. It eliminates the necessity for manual tasks traditionally associated with B2B payments.
This approach offers advantages and cost savings for both the payer and payee. Companies often opt for this process to reduce and manage operational costs while freeing up internal resources.
Payments can be disbursed through various methods, catering to customer preferences:
1. Check printing and mailing
3. ACH (Automated Clearing House)
The choice of payment method depends on selecting the solution that best aligns with the specific needs of your business and vendors.
How does Integrated Payables Work?
Integrated payables operate through a secure online payments platform, streamlining payment processing and management to achieve enhanced cost savings, heightened visibility and control, and accelerated business growth. These solutions seamlessly integrate with your accounting system.
After invoices receive approval for payment, integrated payables solutions extract payment details from your ERP system, gather funds from your account to facilitate payments, and execute the payments on your behalf. This enables users to conduct payables through a unified payments workflow, ensuring timely and accurate payments. Organizations benefit from consistent data reconciliation and control mechanisms across all payment types.
What are the Benefits of Integrated Payables?
Eliminating paper checks and manual payment processing in organizations is not only time-consuming but also costly and resource-intensive. Integrated payables solutions offer a remedy by entirely automating the payment process. This shift makes payment creation and management more straightforward, providing organizations with the following advantages:
Scheduled Payments
Integrated payables simplify payment processing, allowing businesses to schedule payments for due dates, optimize cash flow, and take advantage of early payment discounts. This approach enhances financial planning and positively impacts the company’s bank account.
Online Management
An efficient integrated payables solution includes a user-friendly web portal for vendors, offering visibility into payment details and immediate access to amounts and purposes. This fosters stronger vendor relationships by reducing disputes and payment inquiries and enhancing overall transaction transparency.
Improved Cash Flow
Automation reduces payment processing time, ensuring faster electronic transactions and providing a more accurate view of current cash flow. This streamlined process also positions the company to leverage early payment discounts, contributing to improved working capital management.
Time Savings
By automating payment processes, integrated payables eliminate manual tasks like check printing and mailing. This not only saves time for employees who no longer need to handle these tasks but also reduces costs associated with postage, address cleansing, and postal sorting.
Increased Security
Shifting to automated accounts payable disbursements enhances security by enabling easy transaction review and approval. This minimizes the risk of check fraud, providing a more secure and controlled payment environment.
Drives Growth
Automation through integrated payables serves as a cost-effective way for businesses to manage payables without increasing expenses. This eliminates the need for additional internal resources, allowing management to focus on driving growth and expansion.
Reduced Cost
Integrated payables significantly reduce payment processing costs, optimizing the payment mix for a low-cost, high-value model. Virtual accounts, in particular, offer cost savings and cash-back rebates, offsetting or exceeding payables costs and streamlining overall operations.
Improved Business Relationships
Complete visibility into payment status via a centralized platform enhances transparency, reducing inquiries and disputes. This improved visibility fosters better business relationships and contributes to overall business growth.
Better Data Insights
Integrated payables solutions simplify the payment reconciliation process by connecting invoices to payments automatically. This eliminates errors associated with manual bill registration, providing seamless data insights and improved accuracy in accounting systems.
Are there any Disadvantages to Integrated Payables?
Even though integrated payables is an optimized payable process, there are still some challenges in implementing it to your current processes:
File Format Alignment
Many banks mandate specific file formats, necessitating alignment with the company’s systems. This poses a challenge as it requires the company to adapt its systems to meet the bank’s requirements.
Internal Stakeholder Buy-In
Obtaining support from internal stakeholders, especially when transitioning from legacy systems, can be challenging. Preserving existing relationships with banks and payment partners is crucial to avoid potential disruptions.
IT Resource Constraints
Integration may demand more IT resources than currently available, particularly for older ERP systems that might not support an integrated payables process. This resource gap poses a hurdle to seamless implementation.
Bank Compatibility
A workaround for these challenges is to seek a bank that aligns with the company’s accounts payable system. If the bank supports a compatible file format, it can significantly save time and costs associated with adapting systems.
Addressing these challenges proactively ensures a smoother transition to an integrated payables system, maximizing its benefits for the organization.
Why Businesses Should Implement Integrated Payables Solutions?
Businesses considering the adoption of an integrated payables solution can benefit significantly, especially if currently utilizing various payment methods. Shifting from paper checks to electronic systems, like virtual accounts, is a strategic move worth considering. Collaborating with a proficient bank allows analysis of payment trends among vendors, revealing opportunities for incentives such as rebate programs and early payment discounts.
Opting for a preferred and cost-effective payment method enhances transaction processes, fostering improved business relationships. Embracing a digital system becomes essential for businesses aiming to stay competitive, and an effective integrated payables solution serves this purpose.
While implementing a new solution incurs upfront costs, the long-term gains include time and cost savings, ultimately optimizing business growth.
How to Choose an Integrated Payables Solution?
The key takeaway is the importance of maintaining independence between your accounts payable and payment solutions. When contemplating a shift to integrated payables or any payment solution, it’s advisable to begin with a standalone AP automation solution. This provides a unified source of truth for your invoices, approvals, and payables data. Subsequently, explore integrated payables solutions that seamlessly integrate with your AP solution while retaining their independence. This approach ensures flexibility, allowing you to upgrade payable systems or methods without the need for a complete reconfiguration of your AP process.
Additionally, prioritize integrated payables providers that offer flexibility in payment methods. This grants your business the freedom to choose any payment method without being constrained to a single provider.
Closing Thoughts
To maximize the efficiency of the accounts payable department, it’s essential to automate the entire procure-to-pay process, including B2B transactions. Despite many companies still using paper checks for supplier payments, this approach consumes considerable time and financial resources. The costs associated with checks, postage, and processing, combined with a lack of spending visibility, underscore the inefficiencies of manual processes spanning procurement to payments. Recognizing these challenges, an increasing number of companies are turning to automated solutions to modernize their procure-to-pay processes.
A notable solution in this context is Peakflo’s Auto Disbursement, a transformative tool addressing the payment process gap in B2B transactions. By automating disbursements, Peakflo enhances efficiency, reduces costs, and optimizes resource allocation for strategic initiatives, completing the automation journey for accounts payable departments.
