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Business payments transformation starts now. AP automation has never been as vital to get right for corporates than in today’s landscape. In-line with AFP2020 the payments podcast is speaking to Tristan Thompson of UMB Bank to understand his views on AP automation innovation, and what corporates should be taking into consideration.
Rich Williams: The Accounts Payable function is renowned for being a cost centre. Lack of automation and efficiency can limit the potential for opportunity for an organisation. But keeping ahead of current trends, AP transformation can have an extremely positive financial impact.
Hello, I'm Rich Williams, host of The Payments Podcast. Today, I'm very excited to be joined by Tristan Thompson, Senior VP and Payments Group Product Manager at UMB Bank, to discuss the trends of AP automation and how organisations should be implementing best-practice techniques to transform AP technology and processes.
Tristan, a very warm welcome to the show.
Tristan Thompson: Thanks, Rich. Appreciate it.
Rich Williams: So this episode marks the first week of the AFP Virtual 2020 Conference. With that in mind, let's begin by discussing the general trends we're seeing when it comes to AP automation. And with obvious landscape changes over the past six months, are we seeing an increase in the adoption of digital processes?
Tristan Thompson: You know, Rich, just like many of us who are working from home and operating in this digital-first environment, so are our businesses' AP departments. What we've witnessed is really overnight shifts in how payments are being sent and being processed. We've seen higher uses of digital payments, specifically around virtual cards and ACH. That has been, absolutely, a recent trend.
And then, also, on the flip side, suppliers have now been more open to accepting these payment types than they have in the past. So essentially, both parties – buyers and sellers – are gravitating the digital processes, partly out of necessity, but also due to ease of transition, with some of the new tools available that are out in the marketplace. I'd say the environment has really opened our eyes to various cracks with manual processes. A basic example I would give would be a company who is having to go into their office, every day, to approve cheque runs. That's been flipped upside down, and now, they've had to figure out how to do that virtually.
Maybe, a more unfortunate and extreme example would be a company not being able to get cheque payments out at all. That could be due to a number of staff members who are no longer allowed to go into the office, whether that was a government mandate from a city, and/or a policy change within a company. So you can only imagine what would happen if you had to completely stop payment processing for, say, a week at a time. The nominal effects are missed payments, late payments fees, impacts to your cashflow.
Rich Williams: Lovely. A good start there, Tristan. So what impact does true automation have on the accounts payable process?
Tristan Thompson: True automation does have tremendous benefits when you start to look at what it can do to reduce your manual and exception processes. When I say, "Manual processes," that could be something as simple as manual invoice entry into your system, manually cutting cheques, or maybe, even just time-consuming reconciliation tasks. All these things add up in the day, where time could be more spent on value-added tasks for your particular department.
A great example of how technology has improved AP automation is through what I would call 'smart payment routing'. As you know, most vendors accept more than one form of payment, but if you have a large number of vendors you're trying to manage, it can be hard to manually track what they accept and determine the most efficient way to make that payment. So as a result, some companies are just saying, "Do you know what? I'm just going to default everything to a standard cheque payment." But with smart payment routing, this technology can actually capture and track each vendor's accepted forms of payment.
Rich Williams: How about security, Tristan? As organisations look to adapt to the current landscape and make the most of the changes afoot, how do they ensure their AP processes are as secure as possible?
Tristan Thompson: This is, actually, a big topic. So a lot of times, questions around security and controls, they're now coming up first in the conversation, when we're having discussions around, what recommendations do we have to improve AP processes? Unfortunately, though, attempts around account takeovers, business email compromise, payment interception, and other fraud schemes, they haven't slowed down. So the way I like to approach it is, I typically address security recommendations through two lenses.
First, I'll have them focus in on internal controls, by asking them, "What measures are you putting in place, internally, to keep your AP process safe? Any tool or new system that you're leveraging should be giving you that flexibility to track internal user activity. It should give you the flexibility to customise payment authority, and then, also, segregate duties across your AP staff." Once we move past some of the internal dialogue, I would then shift to talk about external security controls, and what you should be on the lookout for, and what should be established. So I always say, "You need to be mindful of high-risk events or trigger points." An example of that would be a vendor calling your AP team, requesting to change either their contact information, or maybe, their bank account information. If you don't have a secure way to validate that vendor over the phone, and an invalid change is made to their actual bank account, it doesn't matter about all the strong controls you have upfront – whether you've got robust approval and workflow around invoice approvals or payment approvals – all that goes out of the window if, when you send the payment, it's going to, now, a new bank account.
So in order to overcome this, we definitely need to look for AP tools that have things such as layered security. So is there, for example, a portal for a vendor to log in, to make changes on their own, to really take your staff out of the equation to make that manual error? Or is there security embedded that would provide step-up authentication that you and I may be used to? Lastly, machine learning is something that can help you identify those trigger events that I spoke about, and it can really help with risk scoring there. But the last thing, Rich, I will say about security is, when at all possible, just leverage more secure payment types. We've all heard the stats that cheque fraud is the most targeted form of fraud payment. I've mentioned it before, but virtual cards, for example, have tremendous security features.
Some of those features could be things like exact-match controls. So when you send that payment, that payment can only be processed for that exact amount that you specify. So if someone tries to grab that card number and process it for any different amount, it'll immediately be rejected or declined. The other nice thing that happens with virtual cards is having the benefit of single-use account numbers. So gone are the days where you may have some fear to just provide a static credit card number. So now, as you send a payment, it's a single-use card number, and then it's only used one time. When you make the next payment, possibly, to the same vendor, they're going to get a brand-new card number. So really nice security controls there, just by changing your-
Rich Williams: So Tristan, we've looked at the topics of digital automation security there, which are all great points to highlight, and indeed, are all buzzwords which have cropped up numerous times on the channel. Now, referring back to the tagline of this particular episode, when it comes to AP transformation, how would organisations practically follow the market trends and implement an AP process with a positive financial impact?
Tristan Thompson: Great question. The short answer is, leverage your resources. So one of the best ways that I recommend to stay up to speed is, number one, leveraging your banking partners. Then, two, talking with your industry peers. Your banking partners should be able to provide you solutions that are tailored specifically to whatever needs and goals you have. Then, two, connecting with your industry peers, they may be further along in their journey with their own transformation.
Believe me, they're more than likely willing to share what tools are working well, and then what things you should probably try to avoid. So definitely, leverage those resources. With respect to a question around creating an AP process that gives positive financial impact, one of the simplest things you can do here is have an analysis done on your accounts payable history file. The reason for this exercise is to quickly identify which vendors that you're currently payment are maybe already taking card or ACH from someone else.
So what I call those vendors are- Those are the low-hanging-fruit vendors. Because that's how you can immediately start to make an impact to your own organisation, by only changing the way you're making payment. So in summary, there, I'd say, talk to your banking partner. Ask them to review your payment history file, and you're, likely, going to be surprised by the number of opportunities that are quickly obtainable. Any time you go through transformation, it's rare that you go through a big bang and you get there immediately. So it's taking small steps and figuring out what those quick wins are to really get you down the right path.
Rich Williams: Have you seen any examples of this, over the last six months, that you can share with us, please, Tristan?
Tristan Thompson: Yes, we have. So the companies, recently, that are most successful are those that focus on three primary areas. So area one would be selecting the best AP technology tool that provides them both high security, but also, payment flexibility. Area two is a focus on 100% payment automation. So as I just mentioned, you're not going to get there on day one, but if you have that goal and focus to continually migrate to digital payments, digital processes, it's going to go a long way in your journey.
Then, lastly, area three, and I'd say the area that's, possibly, most overlooked, initially, is that vendor experience. So many times, that vendor experience is an afterthought. But just like you, as you go through this new transition and new processes, so do your vendors. So one of the best tools we've seen as of late is really adoption of integrated payables tools. The reason being is that they really allow you to focus on all three of those elements that I mentioned previously.
Rich Williams: That leads, very nicely, onto my next question, Tristan. Now, as mentioned in the discussion, previously, the AFP Conference, this year, is virtual, due to the COVID-19 pandemic. How important has accounts payable become in the role of business resilience, particularly given this challenging time?
Tristan Thompson: So this is definitely an interesting question. During the first few months of the pandemic – let's say March or April 2020 – there was definitely a sense of concern and urgency coming from many of the CFOs and Treasurers I was talking to, specifically around, how do they avoid destructions to their companies' cashflow, through any type of breakdown in AP or AR? So they were asking us, specifically, what options were there, and what leverage could be pulled, if significant process changes needed to be made on the fly, with respect to their payments? I'd also say, many companies did have strong business continuity plans, but a lot of them had a focus around system failures or system downtimes. Not many of these companies had a strong focus on their resiliency within their AP process, and really, how to manage through a long-term remote working environment.
But if we, now, fast forward to today, plans have since been updated by companies, and now, there's been a shift from resolving immediate gaps, to conversations around future-proofing and investing in AP. So the companies that we've been talking with who have been thinking about AP changes for a while now, have now made decisions, and they're going all in. We've also had an uptake in new requests of clients wanting to learn more and wanting to explore what the available options are out there. So Rich, what I'd say is, with every big challenge or hurdle one may face, there are always lessons learned. One benefit with us all going through this is, we will be seeing accelerated advancement in AP, and we will all be in a better position, whether the next wave or set of challenges, whatever those may be.
Rich Williams: Thank you very much for sharing your thoughts with me and the listeners today, Tristan. Hopefully, this will serve as a wake-up call for many of us, who may still see AP purely as a static function, rather than something to continuously evolve and adapt.
Tristan Thompson: Thanks, Rich.
Rich Williams: For those listeners attending the Virtual AFP Conference, you can take a look at the landing page on bottomline.com for more information, and of course, to book a meeting. Unfortunately, that is all we have time for today, but in the meantime, you can listen to more episodes on all things payments at the touch of a button, using your preferred provider. We'll see you all next time.
Alan Koenigsberg, Global Head of New Payment Flows at Visa Business Solutions, and Rob Eberle, CEO, Bottomline, discuss the new world of cross border payments
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