Rethinking remittance in the age of business payments automation

Remittance is the lifeblood of an accounts receivable department.

If it’s rich, detailed, and easy to apply, all is well. When it’s not, the big trouble starts.

At the heart of everything an AR team does is this trend, the urge to automate application and achieve a low- or no-touch process with payments and remittance has intensified over the past 14 months. Companies used to the remittance they receive with checks are finding they have to adapt, change and grow with different payment types coming in the door, and getting the essential data you need to the places you need it to go isn’t a small challenge.

Fortunately, it’s not as though AR departments are being left high and dry. Smaller companies can access relatively simple, affordable software to help enhance their ACH remittance, banks are offering more downstream options in general, and accounts payable teams eager to help out their strategic partners can attach remittance information via CCD or CTX without trouble. The options and ease of use have simply changed.

For all those glad tidings, though, organizations still have a long way to go to be stronger, achieve more clarity, and get on board before those tides of change swamp you entirely.

Understand your processes

First and foremost, there’s a need to better understand your processes today. It may be that even as you’ve begun accepting new payment types, you haven’t taken a good hard look at the long-time, antiquated ways you’ve handled payments. The answer is never as simple as absorbing a handful of demos and thinking an outside tool is going to solve your problems.  That’s because you first need to have better awareness of your inefficiencies.

Start with this mantra: I will not replace my current solution with something that mimics my current process. Even the most disciplined and well-run AR teams can get more efficient if they ditch legacy steps and look to consolidate. Ask yourself:

• how are you getting information in?
• how are you receiving payments?
• are you logging into seven different bank portals?

If any sources of information are scattered, you have a better way forward.

Then move on to whether what you’re doing is trackable and secure. Are you sending items to a shared drive? Once you have payments and data in the door, where are they going? Are you using processes that are exposed to too many people in your organization and are not in line with your own organization’s security protocols?

Finally, how are you reconciling payments and data? Are you doing it in Excel—in which case, I’m sorry—within your ERP, or within an outside solution? Break everything down to the most granular level possible to better understand how often you’re having to touch transactions, and then seek to build. If you’re currently looking at 80% of your transactions being straightforward and low touch, build toward 90%, and so on.

How do you get from A to B?

Once you’ve truly taken stock of where you are today, it’s time to figure out how your organization makes the leap from, say, a 90% match rate to a 95% match rate, or from pure paper to at least some level of automation.

First, remember that you need to build to your next major gain, because instant transformation isn’t happening out of the gate. Particularly if your AR team is struggling after the past year and trying to get away from antiquated processes, you need to build confidence over time by introducing solutions and patiently driving toward mass adoption.

Your team isn’t the only party you need to be patient and thorough with, as you’ll need to remain flexible to the needs of your customers. They may not want to provide the remittance advice in the exact format you want it in, so know your customer and be sure to work around that if you’re adopting new technology. Keeping them comfortable now while building toward a change in the future is the way to go.

Remember, your team and your customers have had their eyes opened to the fact that there are forces beyond our control that make getting into the office impossible, inefficient, or dangerous, and those forces could return. We want the robustness of check remittance, so application is easy, but we don’t want to actually receive checks and be in a position to have to maintain manual processes and throw more bodies at processing.

Above all, balance the need for empathy with overworked teams and customers with the need to get the right remittance detail and processes to make life much, much easier in the future. That will make both your present AR puzzle and the solves ahead as simple as…well, as simple as reconciliation should be in the first place.