The Emerging Trend of Integrated Payables

Before you write off integrated payables as something that is out of reach for your organization, I encourage you to learn more. It could be the solution you need to streamline accounts payable processes. Following are some of the advantages, potential challenges, and recommendations. First, though, what is it? People often have differing definitions. Integrated payables allow an organization to submit to their designated provider a single electronic payments file that encompasses multiple payment methods—check, ACH, and card. The provider facilitates the payments to the specified suppliers, as directed by the end-user organization via that file. It is sometimes called consolidated payables as well.

Last week, I had the pleasure of attending the CPI Middle Market Summit and integrated payables was one of the discussed topics. Providers/banks are increasingly offering these solutions—often through a partnership with a fintech company—to give corporate/business clients another option in relation to their payment strategies.

Advantages

As indicated above, for an end-user organization, integrated payables (IP) can mean simplicity and process ease from payment initiation through reconciliation. The single file approach eliminates the need for AP to send a check file to the printer, an ACH file to the designated bank, and an electronic accounts payable (EAP) file (for Virtual Card and/or buyer-initiated payments) to the designated provider.

In addition to process ease, your organization may reap greater financial benefits by consolidating your payments with one provider/bank instead of using multiple banks. Further, you would have fewer providers to manage.

Potential Challenges

Following are potential challenges only. Do not make any assumptions without researching first.

  • Getting internal buy-in from stakeholders could be difficult. Everyone is used to their current processes. Some employees will resist any option that means losing the relationship they have built with the existing banking/payment partner.

  • Traditionally, organizations do a “card program” request for proposal (RFP) process that excludes other payment methods. Doing an integrated payables RFP would be a change that involves more departments/employees.

  • Older ERP systems may not be able to accommodate an IP process.

  • Implementing an integrated payables solution may require more IT resources than what you have available.

Recommendations

If you start talking with a bank or provider about IP, be sure to define it up front, so everyone is talking about the same thing. Accounts payable expert Mary Schaeffer of AP Now agrees. She observes, “Integrated payables is an area where the banking community needs to educate clients. There is often a lot of confusion about what it is.”

If your organization decides to pursue integrated payables, shop around first. Find out how each provider’s solution works, any fintechs behind the scenes, the related security controls utilized by each entity, who would be responsible for what, and so on.

Final Thoughts

In today’s world, it’s all about devising a payment strategy that takes all payment methods into consideration. Integrated payables is something you will likely hear more about going forward. I even suggested to the NAPCP that they do a future poll on this topic. It is beneficial to keep learning more, as the solution will continue to evolve.

In the case of integrated payables, putting all your eggs in one basket  can  be a good thing.

In the case of integrated payables, putting all your eggs in one basket can be a good thing.



Subscribe to the Blog

Receive notice of new blog posts.

About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

AP Holds a Winning Card Hand

Will 2019 finally be the year in which the key stakeholders within your organization happily, or at least willingly, support Commercial Cards? For some, accounts payable (AP) is the biggest holdout, but, as we all know, their stance on card solutions can make or break a program. This is especially true for organizations wanting to implement or expand an electronic accounts payable (EAP) option like Virtual Cards, which AP typically manages. A common tactic by a stubborn AP manager is to say the ERP system cannot accommodate such payments. Then no one questions them because AP is viewed as the expert in this arena. To reopen the discussion and start making progress, following are insights from an AP veteran and a four-step approach to try in an effort to get through to AP.

AP’s Attitude Affects Everyone

Sometimes even senior management backs down from AP, but this can be the worst outcome for everyone. Accounts payable expert Mary Schaeffer, AP Now, shares, “When I hear someone say that they are going to wait until so-and-so retires before moving forward with a new project it saddens me. Usually it is because the person in question is either difficult to deal with or completely resistant to change. This is not a good situation either for them or for their organization. The reasons it’s not good for the organization are obvious. It gets left behind, less competitive, and doesn’t progress as much as its competitors.”

Mary continues, “The employee in question is also putting themselves in jeopardy. The business world, including the accounting and accounts payable space, is evolving rapidly. The contrary employee is serving as a roadblock to progress, usually coasting for a few years until they can retire. Plain and simple, they may not get those few years. Management may decide their position is no longer needed and they will definitely be at the top of the list for any headcount reduction initiatives. Personally, they’ve missed a great opportunity to try something new and enjoy their last few years of working.”

Organizations may also be experiencing a conflict between AP and the procurement department regarding card payments. In response to an AP Now industry survey, Internal Controls in AP, one AP manager for a large company commented, “P-cards pose problems with duplicate payments. Coming from an AP standpoint, they are disliked, however our Supply Chain seems to love them…” As disheartened as I was to read this (I’m the lead researcher for the survey project in progress), it represents an opportunity.

Getting Through to AP

  1. Recognize AP as an important part of the card program and initiate a respectful—versus confrontational—discussion. To prevent AP from feeling ganged up on, consider a one-on-one meeting to open the door to better communication.

  2. Recap the benefits of Commercial Cards and the organization’s related goals. Encourage questions to ensure AP has an understanding. Sometimes resistance to cards is rooted in a lack of knowledge.

  3. Find common ground; for example, supporting internal goals, making AP’s job easier, etc.

  4. Ask AP about their concerns and challenges. Step through the related processes together to identify the facts. Invite them to brainstorm with you on possible solutions. Everyone wants to feel valued and heard.

Examples

  • If they cite duplicate payments as a problem, determine the extent of the issue, the control gaps that allow it to happen, and how to resolve it.

  • If their challenge pertains to reconciliation, maybe they are making the process harder than it has to be. Inquire about the pain points and share ideas for process improvement that would still retain satisfactory controls.

  • If they view the ERP/accounting system as a roadblock to Virtual Cards, involve the system vendor. There might be functionality that AP is not aware of.

As with most problems, productively working together can lead to positive results. AP’s support of the card program can be a game changer—for them and the organization.

Related Resource

Will your organization win or lose? AP often controls the stakes in the high risk/reward world of B2B payment strategies.

Will your organization win or lose? AP often controls the stakes in the high risk/reward world of B2B payment strategies.



Subscribe to the Blog

Receive notice of new blog posts.

About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

When P-Cards are NOT the Best Option: A Real-life Example

Purchasing Card, Virtual Card, or other payment method? A company for which I did some consulting work was initially planning to adopt P-Cards for certain orders under $2,000. After all, this is where P-Cards traditionally excel. However, a review of the facts revealed otherwise in this case. My ultimate recommendation to them was to back away from their P-Card plan and instead consider Virtual Cards. Keep reading to see why and how this case might align with circumstances within your organization. 

The Situation

The company thought it was spending too much time on low-dollar purchases. Specifically, buying departments had too many invoices to approve and, subsequently, accounts payable had too many invoices to pay. It sounded like a great P-Card opportunity until they mapped out the related purchase-to-pay (P2P) process for these orders. The purchases in question utilized an eInvoicing model for which the suppliers, in conjunction with invoice submission, electronically provided various order details requested by the company. The P2P process was quite slick. The main drawback was the invoice volume; orders under $2,000 comprised approximately 55% of the activity.

Changing to a P-Card process would have actually complicated everything, negating the benefits of P-Card usage. They had cost analyses to prove it. Ironically, the company had a separate P2P process (not their eInvoicing model) that could have benefited from P-Card adoption.

A Better Solution

In their eInvoicing model, Virtual Card payments could have helped by retaining the existing process efficiencies, but providing a secure, electronic payment option. Low-dollar invoices could be consolidated into fewer payments for AP to make and tweaks to their invoice approval process could reduce the burden on buying departments.

Key Takeaways

When contemplating a change to your payment strategy, be sure to:

  • specifically identify the pain points you are trying to solve
  • revisit your P2P requirements, as perhaps some simple tweaks could resolve the pain points
  • document today’s P2P process cost and what it might be after implementing a particular change
  • research various options before making any decisions
Every new payment strategy plan deserves another look before pursuing. You might find that a Plan B would be better. 

Every new payment strategy plan deserves another look before pursuing. You might find that a Plan B would be better. 



Subscribe to the Blog

Receive notice of new blog posts.

About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more