Fast-moving companies, large and small, need modern payment operations that keep pace with the speed of their business growth and product innovation.
Payment operations refer to the entire lifecycle of money movement. That includes initiating payments, setting up approval processes, tracking and attributing sent and received funds, resolving payment failures and returns, reconciling transactions to bank statements, and booking payments to the general ledger.
New research from Modern Treasury shows that payment operations are rarely as smooth as they could be. A Harris Poll survey of companies with 500 to 5000 employees reveals that more than four in five companies (84%) face payment operations problems such as slow payments, a high rate of payment failures, returns and refunds, and data quality errors. What's more, more than one-third of payment operations are still manual, the research found. That can lead to slower processing and more errors.
While payment operations can vary across industries, the process of setting up payments—and making sure your operation can scale as your business grows—begins with a few key steps. They are:
1. Get a corporate bank account.
Every company needs a bank that will work for your needs. Some banks specialize in industry verticals. Some are more willing to work with startups. Others may have rigid eligibility standards, fee structures, or difficult timelines that don't align with your needs. Find one that works—and that will work with you.
2. Select your payment types.
The most effective payment rail can vary depending on your type of business, the functionality you need, and your bank's capabilities. Companies often use multiple payment rails. Factor in elements like speed, cost, and ubiquity into your decision.
If a company sells goods, services, or subscriptions to consumers or small businesses, credit card payments will rank high. New innovations are making it easier to accept credit cards on- and offline, with platforms like Stripe, Square, and Adyen.
For businesses in real estate, insurance, and other B2B services, it's more likely that transactions will happen via ACH, wire, paper check, or Real-Time Payments (RTP).
ACH is a cost-effective, reliable, and hassle-free way to collect recurring payments. ACH works well for sending lower dollar volume while giving you the ability to pull funds directly from customers.
Real-time payments, or RTP, is the first new payment rail in the U.S. in four decades. As its name implies, it allows payments in real time while payments that flow via check, for instance, can take days to clear. Being able to transfer and settle funds instantly is ideal for such things as payroll, utility bill payments, and even retail payments.
Most of the economy is transacted over bank-mediated rails, or through a company bank account. Users log into their bank account, identify the recipient, and the bank sends the wire. Wires are instant and typically get used for higher-dollar volume payments, but they cost more than ACH or check.
3. Understand regulatory compliance.
Every industry and payment rail adheres to specific regulations around money movement. Be aware of them and follow them. Even if you follow them, you could be on the hook if a customer does not follow the rules.
4. Integrate into your product.
Building your own bank integration involves building transmission, reconciliation, and accounting capabilities. Plus, companies will need to integrate payment capabilities into products, automating core payment flows if applicable. Typically, large companies that process high volumes of payments benefit from building an integration. They have a team dedicated to the process. Smaller companies can build an integration, but it is difficult to do without payment expertise. As an alternative, seek out a payments operations solution.
Automation for every rail
The exchange of material goods or services for other goods and services dates back to the Neolithic era. These individual transactions were clear, manageable, and often between two parties.
Today, companies handle tens of thousands of transactions, representing billions of dollars, every day, across various payment rails and through any number of bank portals. Modern money movement, particularly at scale, benefits from automated solutions, and companies are on board. The Harris Poll survey found that more than 4 in 5 companies (81%) say they would benefit from modernizing payment ops in terms of increased speed, flexibility, and transparency.
With a payment operations system based on digital tools, dynamic software, and flexible APIs, companies will see increased productivity of finance teams, faster payments, less risk, fewer errors, better customer service, and greater insight into finances.
To learn more about modernizing your Payment Operations, reach out to Modern Treasury.