Navigating Payment Complexities and Ensuring Operational Resilience

Payments are a critical function for the chief financial officer’s team and essential in ensuring a company’s operational resiliency, a point that has gained recent regulatory attention.

As companies grow, increasing the number of employees, suppliers, and customers, payments can evolve into a very complex process. High volumes of business payments will entail numerous accounts across multiple banks and adherence to complex internal processes or policies, making it almost impossible to manage inbound and outbound payments through manual processes.

Many companies have already invested in automating a large part of their payment operations, using technology to manage their end-to-end payments processes. However, automated approaches are not entirely infallible. For example, they might struggle to cope with a sudden increase in volume on a specific day or may fall victim to a national payment infrastructure failure beyond their control.  

The consequence of failed payments

Anything that stops a company from paying or getting paid has the potential to greatly impact the business and its reputation. For example, not paying employees on time can create a human resources nightmare. The company might lose a negotiated discount if a supplier isn’t paid on time or, worse, that incurs late fees and penalties. Customer satisfaction could plummet if a customer’s account collection date gets missed, incurring late payment fees and subsequent refunds.

In the case of a system failure, finance teams would resort to manual processes that are difficult or nearly impossible to manage. This is because teams would need to generate reports to create payment files, retrieve data from internal systems, and access multiple banking portals. Do the relevant team members still know the passwords? Do they have the relevant security tokens to hand? Therefore, having a backup payments solution makes sense from a business continuity perspective.

During a recent webinar, ‘The Ongoing Challenges of Resilience and Security,’ more than half the attendees (60%) had yet to enhance their business continuity plan to include payments.

What needs doing?

To address this issue, Bottomline has worked with many companies over the past few months, discussing how our services can fit into their business continuity plans.  Through this work, we have created a list of capabilities for companies to consider when thinking about whether their payments are resilient and secure.

Outside of UK Bacs – where a company can connect directly into the central payment infrastructure without the need to connect via a bank, you need to think about connectivity – companies must be able to automatically connect to all their banks globally. If you aren’t using Bacs, we would encourage finance teams to use any necessary means – Swift, Ebics, host-to-host, or application programming interfaces – to integrate the company’s payments systems with their bank. This stops finance teams from manually logging into banking portals to generate or approve payments.

It is also essential to integrate the payments process with back-office systems. Most companies will initiate payments from their enterprise resource planning (ERP) systems, where they may already have multiple approvers. Best practice is to avoid ‘air-gaps’ and potential opportunities for fraud and error in your processes by automating the upload of data from your ERP or other host systems to the solution that connects you to external payment systems like Swift, Ebics, Bacs, and your banks.

In addition, while many payments standards, such as the UK’s Bacs or NACHA in the US, have existed for many years, every bank has implemented them differently. Finding ways to normalise these payment standards quickly and efficiently will prove beneficial, especially as the business grows, and your company adds new banks. Finance teams cannot afford to have their payments stopped or delayed because they are mid-way integrating a new bank.

The next step is to automate policies and workflows as much as possible. This includes payment approval processes, such as the number of approvers based on transaction values or destination countries, and which bank accounts can be used to make those payments. Such controls are typically already in place, but the process may need simplifying, streamlining and automating so that users can collaborate to ensure that payments are made and managed as efficiently and cost effectively as possible.

Avoid complex, fragmented processes

In a second webinar poll, a majority (62%) said the main barrier to gaining control, efficiency and automating business payments was down to complex or fragmented processes. 

Security and fraud prevention is another critical component of a resilient payments system. An automated solution must follow the requirements and security policies, such as who can approve payments using which methods and which payments require multi-factor authentication. To make life easier, we have taken this insight and embedded it into Bottomline’s Global Payments Hub.

It is designed for high availability. It has a dedicated database per tenant to segregate the data between tenants. It is microservices based and uses the latest technology stack from Microsoft. And it is auto scalable, so the system can scale up to comply with high transaction volumes. Importantly, it is completely segregated from established, regular payments processing platform, which makes it a viable business continuity option.

Creating the business case

As companies look to develop or fine-tune business continuity plans and further automate their payment operations, it is essential to articulate the business value that this will bring.

First, an end-to-end automated and integrated solution will drive more efficiency, which means finance teams can avoid chasing or extracting data from multiple systems. Using a straight-through process allows payments to be sent efficiently and securely to the bank.

The second benefit is achieving greater control and visibility. Complete visibility over all payments and who approves those payments will help increase liquidity and reduce risk. An automated system also provides audit trails and reports, in case they are needed in future.

Third, automating payment operations helps improve cash management. With better control of when payments are made, finance teams can improve day sales outstanding and days payables outstanding. Plus, removing manual processes that impede the team’s productivity will also help to lower costs.

We’re interested to hear how other companies measure up to the challenge of navigating payment and resilience complexities. Are payments an integral part of your business continuity plan?