Digitization of the cash request process

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Over the past year and a half, there has been no shortage of technological transformations – and increasingly, businesses have set out to “redo” their accounts receivable (AR) operations through digitization.

As Tim Stahl, senior vice president at Versapay, told PYMNTS, digitizing the cash request process, a key part of the order-to-cash workflow, can reduce by up to 30% the number of overdue sales days (DSOs) from vendors and helps eliminate “short payments” – which means revenue is converted to cash faster in a company’s coffers. This allows finance teams to do more strategic and impactful work.

Platforms such as those offered by Versapay allow providers to start with digital invoicing and maintain “digital tracking” of payments, avoiding paper checks, envelopes and stamps. Suppliers can see if customers have opened emails and interacted with invoices, and can reliably analyze, normalize, and import unstructured and messy payout data (often sent separately from payments) by scanning it.

Best practices exist when the AR process for a vendor and the Accounts Payable (AP) process for their customer are synthesized into one process, where each company is able to see what is happening on both sides of the transaction and can participate in it collaboratively, says Stahl.

Staging

Overall, there is less and less use of paper checks and paper invoices as a means of making payments between buyers and suppliers. While the transactions themselves can be streamlined, reconciling everything in the back office can be a challenge, Stahl argued.

Managing AR is a constant flow of discrete tasks, where each step relies on its predecessor to create a continuum of receiving incoming payments and matching them, in the back office, to the correct accounts receivable and invoices.

To function optimally, companies must retool well-established processes.

Retooling secular processes

“There has always been tension in having payments deposited somewhere, and the details of those deposits come in some other form,” said Stahl.

The age-old methodology was for suppliers to send a paper invoice and for buyers to send checks – and there is an eternal hope that remittance documents contain a list of what should be paid and for what reasons. If anything didn’t match, phone calls would begin.

So now you are suing your customer, trying to get information so that you can access your ERP system and relieve those open invoices, ”Stahl said. “Short” payments could result, and the finance team would then have to open investigations to find out what went missing and why.

He also noted that there can be a shifting power dynamic between buyers and suppliers, driven by the payments themselves. Suppliers who sell to much larger customers may be given payment terms.

All of this has been complicated by the myriad of payment streams entering and leaving businesses on a daily basis. Manual payments abound, but so do digital payments. Credit card processing, ACH payments and PO boxes are part of the picture. ERP, a record system, is not an action system, Stahl said, and is tied to manual reconciliation. The more forms of payment flow there are, the more complicated and difficult it has become for AR departments to perform cash enforcement, with negative spillover effects up and down supply chains.

“Sometimes if a customer is past due, you have to withhold their payments or their shipments,” Stahl noted. “Their ability to buy future things from you has an impact on their credit rating. How will they pay when you try to close the books at the end of the month? You need to be able to reconcile what’s in your bank and what’s in your ERP. Preferred payment methodologies can also be stored on the platform and invoices can be grouped together.

Correction of “short payments”

These aforementioned “short” payments also provide digitally assisted information: as Versapay’s platform is collaborative, buyers and suppliers can invite people to participate in the resolution of this case and the resolution of issues. unapplied balances in a process Stahl calls “platform cash application”. Artificial intelligence (AI) ensures that matching improves over time as cash enforcement becomes more automated, reducing manual tasks and man-hours spent on those tasks.

“Depending on the technologies that you put between you and your client, you may have a lot of information that you can’t have in an analog process, where paper comes and goes,” Stahl said.

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NEW PYMNTS DATA: TODAY’S SELF-SERVICE PURCHASE JOURNEY – SEPTEMBER 2021

On: Eighty percent of consumers want to use non-traditional payment options like self-service, but only 35 percent were able to use them for their most recent purchases. Today’s Self-Service Shopping Journey, a PYMNTS and Toshiba Collaboration, analyzes more than 2,500 responses to find out how merchants can address availability and perception issues to meet demand for self-service kiosks.


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