CPA_Practice_Advisor_June_2020 - 22

How Businesses Can
Strategies Around
THE FIRST COUPLE of weeks of sheltering in place regulations saw finance and
accounts payable organizations scrambling to set up remote operations and
get payments out the door. Most were able to accomplish these goals quite
well. Now we've moved into the next step-establishing efficient workflows
and productive practices. It's still challenging, however. Companies have to find
ways to keep people safe while executing paper-based processes that keep their
teams office-bound. For example, many companies still have to go into the office
to pick up mail, circulate invoices for approval, and prepare checks for mailing.
They also must consider the
best way to move forward and
develop strategies for managing
their teams through economic
uncertainty. The Conference Board,
a non-partisan economic think
tank, recently sketched out three
possible scenarios. Their best-case
scenario predicts a 3.6% decline in
US GDP for 2020, while the worst
case would see a 7.4% decline. In
other words, nobody knows what
the next six to 12 months are going
to look like.
That means AP needs to focus
on conserving cash while keeping operations moving. They can
expect more calls from suppliers
since Accounts Receivable teams

22

JUNE 2020 ■

typically ramp up their efforts in
tough times. They need to prioritize
payments and capture early pay
discounts. Procurement is going
to reach out to try and renegotiate
prices or terms. Treasury is going to
be very interested in the timing of
payments and managing working
capital. It's on the AP team's shoulders to make sure they're engaging
with these teams and coordinating
efforts.
At the same time, they've got to
consider the efficiency and the productivity of their own team as we
continue to work remotely. Among
other things, that means coming
up with a strategy for shifting to
electronic payments at scale.

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Many organizations have
had this goal for a long time,
but, depending on the research
you look at, around 40 percent of
business payments still issue by
check. This number is down from
a decade ago, but still problematic
in a remote work environment. So
why don't businesses pay more of
their suppliers electronically? Well,
as everyone who rushed to shift
suppliers to ACH payments when
shelter at home orders took effect
has learned, you can't just flip a
switch and move all your suppliers.
It's easy enough to find a bank
to handle ACH transactions for you.
It also sounds a lot cheaper upfront
than checks-if you only look at

transaction processing costs, which
are usually well below $1.
But with ACH, you have to
enable your suppliers one by one,
and then store and update their
data securely. That becomes a fixed
cost because there's a constant
churn of suppliers and their bank
data--changes usually around
once every four years per supplier.
You should also expect to manage
exceptions that arise with ACH file
submissions and more nuanced
supplier questions.
Thinking ACH is cheap or
straightforward is one of the biggest
misconceptions holding companies
back from paying electronically.
That's not to say you shouldn't
make ACH payments. That said,
they should be part of a holistic
strategy that addresses the entire
payments workflow, encompassing
all forms of payment, including
international wire payments.
What does that look like?

CARD FIRST
If you're going to reach out to suppliers to enable them for electronic
payments, you should first ask them
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CPA_Practice_Advisor_June_2020

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