Time to Give Up the Kitchen-Table Approach to Payments
In our personal lives, we no longer dedicate a day each month to taking care of bills - spreading a makeshift assembly line of statements, checks, return envelopes, and stamps across the kitchen table. Instead, we manage our finances online and allocate the time we save elsewhere.
Many businesses and, indeed, many real estate organizations are still stuck at the kitchen table, cutting checks. Not only is this method inefficient and impractical, it hinders enterprise growth.
But sometimes, getting started is tough. There’s a lot of fear that if the AP department no longer writes checks or sends them to a check printer, they lose control of the process. Or they have less visibility into who is paid. That’s just not the case.
What is automating payments?
By automating payments, and making them electronic, AP departments gain more control, visibility, and even efficiency. AP managers don’t have to worry about checks somehow disappearing, nor answer calls from suppliers wondering where their checks are, or when they will be mailed.
By using a reputable payment provider, everything is tracked electronically. Just like personal financial apps, AP users can view who was paid, and who wasn’t. They can track when the payments were sent and know their real-time status.
And many good payment providers also offer a portal for suppliers to use so they can see their payment information.
Sending checks isn’t necessarily the best option
Making the transition to electronic and automated payments is often step 1. But smart real estate companies also consider breaking the addiction to checks as step 2.
Real estate companies may want to consider virtual card (essentially, a “card-less” credit card) and ACH payments. Both are based on electronic transactions, are more cost-effective, and are far easier to track. They also have other benefits:
- Can be processed by suppliers exactly like credit cards, but are much more secure for buyers as there’s no need to expose one’s credit card number
- Offer improved control as companies can set parameters around how they may be used
- Features low transaction fees
- Minimizes exposure to fraud
- Enjoys widespread acceptance among suppliers
By lessening reliance on checks, real estate companies can save real money, because they are not paying for supplies, printing, postage, document storage, bank processing fees, and labor. Checks also cost real estate companies in some less conspicuous ways.
- Missed Early Payment Opportunities - since issuing manual payments takes such a long time, paying before the due date is virtually impossible. This leaves little room to capitalize on early payment discounts.
- Missed Rebate Opportunities - paying by check means missing out on cashback. With payments via virtual cards, organizations can earn rebates on every dollar they spend. Considering the vast number of suppliers each real estate company uses, they could quickly generate considerable returns.
- Poor Visibility - by relying on legacy paper-driven processes, real estate companies have a difficult time monitoring and optimizing each business unit’s spending. Instead of being able to operate strategically and proactively, they’re forced to make decisions based on inadequate and incomplete data.
Making the transition
Since suppliers are so accustomed to receiving checks, it’s natural to wonder if they’ll even be interested in payment alternatives such as virtual cards or ACH. An ideal payments partner will be equipped to conquer this challenge. They will educate suppliers about the benefits of each method, and work collaboratively to settle upon the best option for the supplier’s business.
It’s important to treat them as equals to make the transition as easy as possible.
Innovating payments can lead to financial transformation
While automating AP payments - and shifting the balance from checks to virtual cards/ACH - may not sound financially strategic, it is. Both steps can contribute significantly to the enterprise as a whole:
- Supplanting checks with virtual cards can produce lucrative rebates and introduce a new revenue stream for the business.
- More streamlined and reliable payments improve supplier relationships. Conversations can move away from payment logistics and onto how each party can work more strategically with the other to drive mutual improvement.
- Efficiently processing payments allows for operational scalability without needing to add additional headcount.
- Electronic payments are more secure and make businesses less susceptible to costly incidents of fraud.
How to get started
Once a company has identified that payment transformation is wanted and needed, a few crucial steps should follow:
- Sell E-Payments Internally - inform internal stakeholders how and why processes are changing so everyone can be a champion of the new initiative. Real estate organizations should prepare themselves for concerns around:
- How the new payments process will integrate with existing GLs and/or ERPs
- How the expansive supplier base will react to a new way of transacting
- How each business in the portfolio will be affected by a change in SOP
- Outline Goals - is the intent to convert every supplier to electronic payments, or only certain suppliers? Will there be a focus on one payment method in particular? Deciding what is important upfront will be key for measuring benchmarks and project success.
- Pick the Right Partner - select an experienced payments provider who has helped similar companies with similar challenges. An ideal provider can address any doubts - internal or external - around electronic payments, and help define and refine the project trajectory to ensure both the business and their suppliers achieve all that was envisioned at the outset.