Chocolate chip cookies are among the most popular of American baked goods and a simple search on Google will turn up nearly 2.5 million results. The key to making great cookies, no matter which of those results you go with, is attention to detail and execution. However, in Accounts Payable automation, as in basic baking, it helps to follow a tried and true recipe. Inferior ingredients equals inferior results. Shortcuts end up being long cuts, so paying heed to the wisdom of others who have gone before you tends to be a more savvy way to go about things.
Therefore, before you begin your automation initiative for adopting virtual payments, take a moment and a gander at the short list before you of items you need to do to ensure you get a good return for your efforts.
Here’s the recipe for a winning automated virtual payment program implementation:
- Segmentation – Paystream Advisors recently released a highly relevant and timely whitepaper on the subject, titled Perfecting Payment Practices Through Spend Segmentation, where they say “Perfect Payers utilize segmentation tools and analysis to optimize supplier payment terms and craft a strategy to improve payment effectiveness. To help financial managers evaluate the opportunities in payments, PayStream suggests that organizations conduct a spend segmentation assessment through their card provider or a payments consulting firm. With help, organizations can optimize payment terms and develop a strategy to increase the effectiveness of AP. These assessments usually identify a “sweet spot” where savings and supplier benefits are maximized with the use of virtual accounts.” Perfect Payers per their definition are those organizations who pay 95% on time, 95% electronically (EFT etc.), and 95% with discount captured. The point is that by isolating which of your target vendors represent the best return for your labors, you can reap the low hanging fruit off of your vendor list quickly and then target those that may require more convincing or attention.
- Mindset transformation – A key factor that needs to happen to enable the effective pursuit of payment automation is a shift in perspective not only on the finance leadership side, but also the staffing side as well. Shared participation in the execution of the payment program is critical as a unified vision for the end game (on-boarded vendors that accept electronic payment methods) compels a virtual payment program through from concept to completion. In many cases, the success of a virtual payment program implementation can fund the cost of an entire AP organization and then some, which enhances the overall health of the organization as an additional benefit.
- Planning – We’ve all heard the adage that Rome wasn’t built in a day, and to the extent that virtual payment adoption is Rome, the same principle applies. Getting vendors to onboard should immediately begin with the segmentation effort mentioned above for a quick hit list of those who may already accept the virtual payment being offered. For example, if your service provider or consultancy could identify those who accepted MasterCard or American Express payments as a free service to you that would be the best starting point. Subsequent to that is where it would be beneficial to have a plan for later vendor adoption. Typically this is done through a combination of postal letters, e-mail, and dedicated phone follow up. Additionally, communications on purchase documents or during the purchase process can help with vendor onboarding as new vendors can be guided through their payment options and often incented via discounting methods.
So, there’s a quick action list of items that can positively influence your virtual payment program efforts. To learn more about other Accounts Payable automation strategies and tips, click here.