January 31, 2019
Organizations today are dealing with a broad network of vendors, which requires timely demand fulfilment and the streamlined processing of invoices and payments. Large organizations face particular challenges in meeting the demands of an evolving, high-paced business world, especially when operating with manual back-office processes. These organizations stay competitive by using back-office automation technology, including accounts payable (AP) and payment automation software.
Companies can approach payables automation from many different strategic angles and starting points. Some companies start with invoice management tools that address the front end of the payables life cycle, but do not solve other prevailing back-office issues such as delays and discrepancies due to high paper check volume and costly payment processes.
Others seek to eliminate paper check payments by using methods such as ACH payments or electronic payment programs provided by their banks. But basic ACH technology and bank-provided payment services are limited, and they leave AP staff to manage payments and supplier information. Bank-based payment tools also limit both supplier enablement and insight into supplier data, and they typically offer decentralized workflows that can be challenging to monitor and reconcile.
Focusing solely on the invoice side of payables automation also proves to be expensive. AP management software implementation costs time and money—particularly for large, complex organizations with many suppliers and manual processes.
When a company chooses to automate payments first, it can create a better environment for automating other AP functions down the line. A well-managed, strategic payments automation solution can increase rebates and discounts, resulting in recouped capital that organizations can use to fund further automation.
This white paper is for enterprise organizations with limited AP and payments automation that seek ways to strategically improve their payables efficiency. It reviews payables management trends and highlights the benefits of automating payments at the beginning of an overall automation initiative.
To better understand the payments landscape and the state of back-office automation, Levvel Research surveyed over 300 back-office employees across several market segments and industries. The findings show that cloud-based AP software adoption is still in its early days, and that most enterprise companies currently use either a homegrown solution or an invoice workflow solution within their accounting software or ERP, see Figure 1.
“What type of AP automation tool do you use?”
Levvel Research’s data shows plenty of room for growth in the payment automation solutions market. Only a fraction of enterprise organizations are making card payments, and most continue to rely on paper checks or ACH transactions, see Figure 2.
“How does your organization process its supplier-related payments?”
Manual back-office processes are typically inefficient and susceptible to error. Maintaining both compliance with internal policies and regulations such as SOX as well as adequate protection against fraud is difficult when there is little visibility into processes. Manual processes make it unfeasible to approve invoices in time to capture early-pay discounts and implement robust working-capital programs. Further, organizations that rely on manual processes often struggle to manage outstanding liabilities and effectively address discrepancies and exceptions.
Levvel Research finds that enterprise organizations are particularly challenged by missed potential supplier discounts and late payments, see Figure 3. This concern over missed discounts may be fueled by the typical order size and overall volume of transactions among enterprise organizations. Considering the high number of payments, there is a lot to gain in terms of discounts and potential savings from streamlining payments processes.
“What are the biggest challenges your organization faces in the payment management process? (Select up to three)”
Despite the challenges that AP automation can eliminate, organizations can face pushback for many reasons as they initiate back-office automation. For enterprise companies, budgetary/financial issues seem to be primary barriers to AP automation. More than one-third of responding enterprise organizations cite a lack of budget as a barrier, while almost a quarter cite the perception that there will not be an ROI, see Figure 4.
“What do you perceive to be the greatest barrier to adopting a cloud-based AP automation solution in your organization?”
Although finance and budget are both top concerns for enterprise organizations that want to automate their AP, starting with payment automation can offer a strategic response to those concerns. By initiating AP automation with payment automation, an organization generates cost savings through discounts and rebates. This creates substantial ROI that can potentially fund future automation investment.
The following section further explores the benefits and ROI that can result from starting a payables automation initiative.
Payment automation savings can help fund subsequent front-end AP automation, such as invoice management. For example, starting with payment automation allows an organization to capture discounts and rebates on current invoice payments. Table 1 shows potential cost savings and card rebates that can result from different volumes of payments made to a given supplier, see Table 1.
Those savings can potentially increase as the organization makes more supplier payments through the solution they have in place. For example, suppose a company is making 75 percent of their supplier payments via check. The only way for the company to offset the costs of check payment would be to capture early payment discounts by paying invoices early—a goal that the company rarely achieves due to its lengthy manual payment process. Once the company decides to implement a payment automation solution, they can make 65 percent of their payments via a commercial card tool. Since they are much faster, these card payments increase the company’s chance of capturing early-payment discounts that can result in rebates, thus increasing cost savings.
Payment solutions can be implemented more quickly than front-end AP automation such as invoice receipt and workflow tools, enabling an earlier return on that technology investment. Automated front-end implementations can take several months in a best-case scenario, whereas organizations can implement payment automation and start capturing rebates in just a few weeks.
Automating payments also reduces costs in terms of supplies (e.g., printing and mailing materials) and employee labor. Freed from the burden of printing and mailing checks, AP staff can dedicate more time to strategic tasks. Cloud-based payments products can increase efficiencies by integrating simply with existing systems, and their intuitive user interfaces can enable quick implementation and staff onboarding. Overall, the relatively quick implementation and efficiency gains of payment automation allow organizations to keep pace in today’s competitive business landscape.
When selecting a payments automation solution, an organization should identify a tool that meets “best-in-class” standards. An integrated, cloud-based, best-in-class solution should allow companies to process all payment types—card, ACH, international wire, or printed paper check—within their ERP/accounting system. By enabling all payment types, the payment automation solution provider can enable a strategic approach to payments by applying the payment method that yields the highest rate of return on every payment.
Best-in-class payment automation solutions should also be able to manage virtual card payments. Among many other benefits, virtual cards yield working-capital gains for both the buyer and the supplier, as suppliers receive payments faster and buyers get to extend their outstanding days payable. Virtual cards also provide protection against fraud. In some cases, suppliers may push back against accepting electronic payments due to merchant fees, making it important to educate the suppliers on the broader benefits of virtual cards.
All payment automation solutions should make the entire payment life cycle more visible and traceable by offering a single workflow for domestic and international payments. Both centrally stored, searchable payment data and clear payment history reporting allow for greater insight into the entire payment process, which can facilitate auditing and improve query response times.
Finally, best-in-class payment automation solutions include continuous supplier enablement. Whereas organizations on their own can typically only enable 10-20 percent of their suppliers to accept electronic payments, a best-in-class solution can potentially enable all suppliers to do so, regardless of their payment volume. With suppliers onboarded and managed by the payment automation solution, AP staff are relieved of the repetitive, manual tasks of verification and information management. Moreover, suppliers can update their own information with the solution provider—including address, bank information, and payment type—thus reducing the risk of failed payments due to unforeseen changes in supplier data. Remittance delivery can also be configured based on supplier preferences, making a payments automation solution ideal for supplier data management, a particularly valuable feature in industries that face regulations pertaining to data storage duration and methods.
Automating AP processes is no longer optional for organizations that wish to remain competitive. Increased rebates and early payment discounts that result from starting AP automation with an payment automation solution can potentially pay for the solution on their own. Best-in-class solutions manage suppliers and their data in real-time, as well as automate payment methods that procure the greatest returns. Ultimately, payment automation enables organizations to focus less on reducing costs and more on strategic efforts that will ensure their business success.
Nvoicepay helps to transform the way enterprises pay their domestic and international suppliers. For over 500 customers across 2,700 entities, the company optimizes electronic invoice payments for enterprises with intuitive cloud-based software and comprehensive services. Nvoicepay offers an intelligence-driven payment automation solution purpose-built for the most complex organizations. By automating all payments, finance teams win through dynamic supplier activation, superior supplier services, and remarkable results, unlocking value in the payments process. Learn more at https://www.nvoicepay.com or on Twitter at @Nvoicepay.
Levvel Research, formerly PayStream Advisors, is a research and advisory firm that operates within the IT consulting company, Levvel. Levvel Research is focused on many areas of innovative technology, including business process automation, DevOps, emerging payment technologies, full-stack software development, mobile application development, cloud infrastructure, and content publishing automation. Levvel Research’s team of experts provide targeted research content to address the changing technology and business process needs of competitive organizations across a range of verticals. In short, Levvel Research is dedicated to maximizing returns and minimizing risks associated with technology investment. Levvel Research’s reports, white papers, webinars, and tools are available free of charge at www.levvel.io
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Research Senior Manager
Research Content Specialist
Major Bottoms Jr.
Senior Research Consultant
Anna Barnett is a Research Senior Manager for Levvel Research. She manages Levvel's team of analysts and all research content delivery, and helps lead research development strategy for the firm's many technology focus areas. Anna joined Levvel through the acquisition of PayStream Advisors, and for the past several years has served as an expert in several facets of business process automation software. She also covers digital transformation trends and technology, including around DevOps strategy, design systems, application development, and cloud migration. Anna has extensive experience in research-based analytical writing and editing, as well as sales and marketing content creation.
Jamie Kim is a Research Content Specialist for Levvel Research based in New York City. She develops and writes research-based content, including data-driven reports, whitepapers, and case studies, as well as market insights within various digital transformation spaces. Jamie’s research focus is on business automation processes, including Procure-to-Pay, as well as DevOps, design practices, and cloud platforms. In addition to her research skills and content creation, Jamie has expertise in design and front-end development. She came to Levvel with a research and technical writing background at an IT consulting company focused on upcoming AI and machine learning technologies, as well as academic book editorial experience at Oxford University Press working on its music list.
Major Bottoms Jr. is a Senior Research Consultant for Levvel Research based in Charlotte, NC. He plays a key role in the analysis and presentation of data for Levvel’s research reports, webinars, and consulting engagements. Major’s expertise lies in the Procure-to-Pay, Source-to-Settle, and travel and expense management processes and software, as well as technologies and strategies across DevOps, digital payments, design systems, and application development. Prior to joining Levvel, Major held various roles in the mortgage finance field at Bank of America and Wells Fargo. Major graduated with a degree in Finance from the Robert H. Smith School of Business at the University of Maryland.
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