Articles published on this website prior to October 2012 have been archived, and some information and links may be out of date. This follows the acquisition of Albany Software by Bottomline Technologies in September 2012.
Published on Friday, June 22, 2012
Today, too many organisations are using outdated payment processes that take too long, demand daily processing and lack any kind of business continuity. As Georgia Leybourne, Sales & Marketing Director, Albany Software, explains, simply accepting the painful, time consuming traditional payments model is short-sighted when companies can exploit the current generation of secure Bacs payment technologies to cut costs, minimise risk and finally achieve true STP.
No business can risk missing payments to critical suppliers or failing to make the payroll run; but is that any excuse for the expensive, time consuming payment processes that are still in place in the vast majority of the UK's SME organisations? Whilst an extraordinary number of companies still make payments by cheque, those that have made the move to Internet-based payments are finding the process even more cumbersome and inflexible.
Why is the Finance Manager having to process payments on a daily basis in order to maximise cash flow? Why does it take up to 17 clicks to make each payment via Internet banking - and that is even assuming the system is available and works without glitches. With a number of the Internet banking payment services enduring significant downtime in recent months, confidence in this payment method has dropped. Add in the complexity of finding the payment file itself to login, remembering the password and finding the calculator that generates the PIN code, and it is little wonder that most Finance Managers find the physical act of processing the payment a headache.
Yet the result is to add extraordinary business risk. The banks offer no contingency service - so if the system is not available for any reason, the payment run will be missed. Furthermore, the cut off time of about 4.30pm to provide the banks with a chance to process the payment, places further pressure on Finance Managers juggling cash flow demands. And, of course, if the company wants to change its bank in order to exploit a better service or interest rate, the entire payment process also has to change - a factor that has deterred organisations from making an important review of banking services.
This model is clearly inefficient, and when considered in conjunction with the huge improvements in finance and supply chain processing that have occurred in recent years, such payment processes cannot be justified. Finance Managers could and should be doing something far more proactive with their time than manually processing payments.
Payments are just one part of the accounting/ERP solution - and there is no reason for this back-end operation to be so complex. It should be as streamlined as every other aspect of the finance process - if the ERP solution has matched invoices with purchase orders and streamlined authorisation, there is no need to replicate this work in the payments process.
Using a Bacs payment software solution, payments can be prepared up to a month in advance. This enables Finance Managers to identify which payments have to be paid when and load that information into a single file with multiple payment dates.
This file can then be uploaded automatically from the accounting solution; information is collected, validated and formatted automatically, authorisation is manual or automated as an option based on the rules defined - allowing a company to impose as much or as little manual intervention as required. For example using a Hardware Security Module (HSM) that exploits Public Key Infrastructure (KPI) the entire process can be run 'lights-out' with complete confidence if desired.
Taking this approach transforms payments on a number of levels. Firstly, transactions can be made up until 10.30pm providing far more business flexibility. In addition, for companies exploiting the ability to plan payments up to a month in advance, a payment can be recalled up until the day before it is due to be settled by the bank, giving the company complete control over the process. Organisations also have access to the Faster Payments Service and a full business contingency solution to guarantee the payment run will never be missed.
The benefits of streamlining payments are not only associated with reducing risk and minimising stress for Finance Managers. By removing the time consuming daily payment process, the cost benefits are significant - most organisations will achieve a return on investment within 6 months, 12 months at the outside. In addition, with a generic payment tool, companies can move between banks to get a better deal without impacting the payment process in any way.
There is no longer any reason for payments to provide the weak link in the financial transaction process. This is a critical, perhaps the most critical, aspect of the business. Ensuring payments are accurate, documented, authorised and reconciled is important; yet this is well handled within the ERP or accounting solution. The payment solution should simply complete the process, not provide a complex, onerous, resource intensive daily task.
By replacing cheques with Internet banking, businesses have not streamlined payment processes. Instead they have created a huge administrative problem that is undermining business confidence, jeopardising cash flow and risking payment failure. It is time for businesses to take control and make use of professional payment services - either via in-house Bacs software or a third-party provider - to achieve a robust, risk free and timely payment process.