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Rescuing Your Payment Process from Covid-19 Slow Downs

Rescuing Your Payment Process from Covid-19 Slow Downs

Author: Carrie Zoucha, Vice President, Commercial Card Corporate Banking

If your business is feeling the impact of Covid-19 mandates, you aren’t alone. A survey conducted in late March revealed that 71 percent of businesses were unable to operate at full capacity due to stay at home orders and other restrictions. That number increases to 76 percent for small businesses.

One area of operations that has been hit particularly hard by state-mandated business closures and remote work orders is the payment process. For many organizations, their accounts payable operations include a complex chain of procedures dependent on human oversight and intervention.

However, reopening state economies and returning to more normal working conditions won’t automatically solve for the challenges that your business may be facing as a result of the pandemic. Late payments may have escalated during the Covid-19 crisis, and clearing invoice backlogs with manual workflows will take time that could impact your bottom line.

As a result, businesses are realizing that making credit card payments helps to speed the payment process and keep vendors happy.

Payment Inefficiencies Are Highlighted in Times of Stress

The pandemic has highlighted existing inefficiencies in business payment processes. For example, receiving, processing and approving paper invoices often requires onsite teams, resulting in a slower payment cycle during remote work orders and business closures.

As late payments accrue, your business will receive an increasing number of inquiries. The task of fielding and answering these is complicated when teams can’t access critical onsite systems or files.  

Unfortunately, the real impact of inefficiencies like these often hits the bottom line. For example, if your business can’t pay vendors on time, shipments could be delayed or suspended. Supply chain disruption could have a trickle-down effect on the company, resulting in an inability to meet customer demands that could translate directly into decreased profits.

Late payments could also cost you leverage with suppliers who may stop negotiating terms and discounts. By some accounts, the number of late payments has soared 70 percent during the Covid-19 pandemic. This leaves vendors with little room to negotiate with slow paying customers.

On the other hand, you could easily be missing out on discounts already negotiated or even overpaying on taxes and duties without strict oversight of your payment process. Remote work and temporary business closures have separated many business owners and AP teams from direct oversight of payment systems, increasing the odds of errors.

Disruptions to the payments process has also impacted cash flow for organizations. A look at China, the earliest country to be hit by the pandemic, reveals that 85 percent of small and mid-sized enterprises expect to run out of cash without outside intervention. Unpaid invoices make it even harder for businesses to forecast cash flow and manage pandemic-related challenges.

Whether businesses are working remotely or returning to their normal office spaces, AP teams are looking for ways to address the challenges they face, and demand for automated payment solutions is accelerating.

Understanding the Need for Payments Automation and Faster Payments

As the pandemic continues to unfold, the demand for faster payments has grown. Automating the payment lifecycle with a cloud-based solution through your financial institution speeds payments to vendors and increases internal efficiency, even when teams are working remotely.

That’s because invoice data is captured electronically. Payment systems then automatically start the approval process, tracking the invoice along the way. Once an invoice has been authorized for payment, the system then sends funds to the vendor and reconciles payment with your accounting software.

AP departments with high levels of automation process 16 times more invoices per full-time employee each month versus their less automated peers. This speed and efficiency is critical in helping businesses that may be challenged with a backlog of unpaid invoices.

Automating payments can also help your business save on expenses. For example, businesses can save 70 percent or more on payment processing costs and receive cash back rewards from credit card payments when using a solution like FNBO’s Payables+. For even faster payments, businesses can turn to automated solutions that support card processing. On average, check payments cost $5 to write and mail but many commercial cards will cost you nothing and often come with the ability to earn rebates or rewards.

Commercial cards can be used for a wide variety of purchases, from small-dollar office purchases and business travel to fleet expenses and supplier invoices. Credit card payments are also more secure. A survey conducted by AFP Exchange found that 70 percent of businesses were victims of check fraud last year. On the other hand, only 29 percent of have seen fraud activity related credit card payments and the number continues to decline.

Since many businesses were forced to close their operations during Covid-19 shutdowns, cards offer another advantage as companies begin to reopen doors—the advantage of time. Most commercial cards will allow you to float payments for 60 days, giving you breathing room to start realizing cash flow again before you need to begin making payments on invoiced amounts. Overall, using commercial cards streamlines the payment process, providing your AP teams greater control while driving efficiency and more timely payments.

Fortunately, the process of setting up an automated solution that supports card payments is often relatively simple. By contacting your financial institution, you can learn about the different payment solutions available to you and which solution will best meet your business’ needs.

Learn more about FNBO’s business payment solutions.

About the Author
Carrie has over 20 years of banking and payments industry experience. In her current role, Carrie has the opportunity to work with large corporate clients. She enjoys learning about their business and helping them grow by providing a range of solutions, including commercial card and corporate treasury services.