Overcome 7 Payment Strategy Hurdles

A successful payment strategy begins with understanding the pros and cons of the available B2B payment options, and determining which option is best for different types of purchases and suppliers. Your organization can reap ample rewards, such as reduced costs, increased efficiencies, and minimized risk—to name just a few. Yet, hurdles to payment strategy success can occur at any stage: buy-in, development, implementation, and ongoing management. Where does your organization stand? Following are seven hurdles you might experience, along with suggestions for overcoming them.

Buy-in Hurdles

1. Lack of Leadership

It usually takes an executive champion to spearhead change and, often times, senior management is focused on other business aspects, like sales. They might view the development of a payment strategy as unnecessary unless bills are not getting paid. See related content: The Payments Iceberg: Innovation and Realities.

To get their attention, create a compelling business case for a payment strategy—one that documents the costs and risks of what you are doing today (hint: start with your check usage), and how a strategic approach can literally pay off.

2. Turf Wars

Procurement and accounts payable (AP) fulfill important roles related to a payment strategy. However, we know that, in many organizations, these two groups fail to communicate. They might be possessive about their respective tasks, fearing job loss or job changes that take them out of their comfort zones.

Bring the stakeholder departments together, which might require a management-level initiative, to discuss their concerns and the benefits of a payment strategy. Everyone should be willing to support the organization’s goals over their own interests. Further, everyone will come out looking better through collaboration.

Development Hurdles

3. Lack of Knowledge

Even when your organization is ready to move forward with developing a payment strategy, it can fall short if internal knowledge is lacking. As noted in the introduction, understanding the pros and cons of different options is critical to success. Seek the necessary education and be receptive to hearing what different providers have to say.

4. Undefined Parameters

The process for divvying up purchases/suppliers can become random, leading to missed opportunities. Supplier X has requested checks, so we’ll keep them in that lane. Not so fast.

Identify the factors that should drive payment-related decisions. What is most important to your organization—cost, fraud risk, ease of use, etc.? Allow the priorities to guide the decision making. Further, do not automatically sign up new suppliers for ACH payments, which can interfere with card-related goals. Definitely incorporate ACH into your strategy, but do so mindfully.

Implementation Hurdles

5. Limited Resources

This hurdle can enter the picture at any stage, but is especially common once decisions are made. It might take a team of people to contact suppliers, update any existing payment-related contract terms, clean up the master vendor file, communicate the payment strategy (or payment policy) internally, etc.

Team members need appropriate time to work on the tasks, which could mean shuffling around their other duties at least temporarily. Document the roles, responsibilities, and a timeline. Keep everyone accountable. Also, take advantage of any assistance offered by your provider partners.  

6. Lack of Communication

Failure is a notable risk if no one knows the payment strategy/policy exists. Strive to communicate various ways, including conducting brief meetings with departments. Keep the communication going through ongoing employee training.

Ongoing Management Hurdle

7. No Follow Up

All the work involved with implementing a payment strategy can go to waste if no one monitors whether things are going as planned. Do not keep paying a supplier via check if they agreed to an electronic payment method. Someone needs to be responsible for monitoring the progress and taking action if the strategy gets off track.

See more content on payment strategy.

Overcoming the hurdles to payment strategy success leads to organization rewards. (Photo by Interactive Sports on  Unsplash ).

Overcoming the hurdles to payment strategy success leads to organization rewards. (Photo by Interactive Sports on Unsplash).


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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 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.



Subscribe to the Blog

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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