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.



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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

Does the Procurement Team Care About Payments?

My answer to the above question is, “They should.” Yet, more than one person has recently told me that the procurement team limits their focus to supplier selection and negotiating low prices. They view payments as something accounts payable handles. Such thinking is narrow minded since payments begin with the terms and conditions in supplier contracts and purchase orders. Perhaps an interest in payments only surfaces when the procurement department manages the card program. However, whether they like it or not, “purchase” and “pay” go together. Following are things both management and procurement should do to contribute to organization success.

What Management Should Do

Regardless of which department administers the card program, management should demonstrate leadership by doing the following.

  • Clearly identify the roles and responsibilities of procurement and AP related to internal purchase-to-pay (P2P) processes.

  • Communicate their expectations for how the two departments should work together to effectively execute the organization’s P2P preferences.

  • Hold employees accountable.

  • Establish quantifiable goals for reducing check payments through increased card usage.

  • Support continuing education in the P2P space, directing employees to pursue topics that could help the organization more quickly achieve its goals.

What Procurement Should Do

Speaking from my experience as a former procurement person, the following actions help raise the profile of the department in a positive way.

  • Actively work toward exceeding management’s expectations. This could include proactively expanding the team’s knowledge about electronic payments, particularly Commercial Cards. Invite the card program manager to deliver related training to procurement staff.

  • Make it a standard operating procedure to address card acceptance in competitive bids and contracts.

  • Meet with each internal “buying department” on a regular basis to: discuss that department’s suppliers and the applicable P2P process, inquire about competitive bids that need to be done, and educate them about the organization’s card program.

  • Monitor adherence to contract terms concerning payments. If there is a problem, respectfully work with the buying department, AP, and/or the supplier to get things back on track.

Final Thoughts

Even if management does not take the initiative to unite procurement and AP, these two departments should take it upon themselves to work together on P2P processes. Driving organization success means department and employee success.

Related Content

Does procurement care about payments? The answer should be a firm “Yes.” If not, take the appropriate steps to get them on board.

Does procurement care about payments? The answer should be a firm “Yes.” If not, take the appropriate steps to get them on board.



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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

The Payments Iceberg: Innovation and Realities

In the 1970s, anthropologist Edward Hall developed the iceberg model of culture to express how visible aspects like fine arts are dwarfed by what is hidden below the surface (e.g., relationships, attitudes, approaches). The concept could be applied to the payments industry as well. This month, while at the Cards and Payments on Campus Conference by PDG, I attended sessions about emerging technology that dazzle the mind and represent the tip of the iceberg. There are lots of great things happening. Yet, I also encountered—as I do every time I am at an event—challenges that have plagued end-user organizations for decades. It’s the reality that sits solidly under water. As a result, I have formed three conclusions, as outlined below. Take a look and see what you think. I welcome comments and always enjoy hearing different perspectives.

Three Conclusions

  1. Innovation has multiple personalities.  
  2. Gaps between different entities keep getting bigger.
  3. Payments do not always make the priority list. 

The Multiple Personalities of Innovation

At the conference, Matt Dill of Visa addressed the future of payments. Some advancements, like Amazon Go (“a new kind of store with no checkout required”), perfectly illustrate how innovation can be baffling, appealing, and necessary all at once. We may not always understand how something works, but we think it is cool. The practical, necessary side of innovation include factors like payment convenience and security. Payments have to seamlessly mesh with our ever-expanding, technology-driven world. Innovation will continue. It’s exciting.

Widening Gaps

I heard attendees ooh and aah over what Matt showed. Then, during Q&A at the end, some questions pertained to longstanding struggles end-user organizations have (e.g., trying to pay remotely for the hotel stay of a traveling employee and hotels requiring a copy/photo of the card). Throughout the conference, end-users shared the same types of challenges that I heard 15 years ago.

On one hand, technology is soaring. On the other hand, some organizations have not changed anything about their payment strategy in decades. Providers have solutions for common challenges, but some organizations are not pursuing them. The gaps are widening, which leads to the last point.

Payments Do Not Always Make the Priority List

In many cases, executives within end-user organizations have too many initiatives to manage and sales goals to meet. No one has time to address something if it is not absolutely broken, so B2B checks remain. Checks are costly and inefficient, but, as some execs would argue, they get the job done. 

Real, across-the-board change will not occur within the end-user community until there is an overhaul of decision makers. We need more leaders who: 1) embrace payments innovation at a consumer level, and 2) see the value in similarly aligning B2B payments. Finally, the decision makers need to be at industry conferences to see what is possible. 

See more about payment strategies.


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

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