Payment Optimization

What is Payment Optimization?

Payment optimization is a strategic approach a business takes to streamline payments in the accounts payable workflow to:

• Minimize payment processing costs 
• Ensure cost-effective operations
• Reduce friction in payment processing
• Increase on-time payments
• Maximize payment discounts from vendors
• Improve vendor relationships
• Enhance security

Accounts payable teams select appropriate payment methods and timing according to the invoice or vendor. Payment processes also need to comply with applicable laws and regulations, which may change across borders. 

How Do You Prioritize Payments in Accounts Payable?

Prioritizing payments in the accounts payable workflow requires a systematic approach to making critical payments on time, optimizing cash flow, and maintaining positive relationships with vendors. Aligning payment priorities may also require collaborating with other departments. 

Implement payment automation to streamline processes, reduce delays, avoid errors, and have full visibility over all outstanding payables. 

Here are some criteria that AP departments can use to prioritize payments:

• Importance or urgency: For instance, key suppliers and utility bills necessary for ongoing operations should have the highest level of urgency. 
• Payment terms: Settle invoices according to defined payment terms. Take advantage of early pay discounts negotiated in vendor agreements.
• Due date: Use Payable Aging reports to see outstanding payables and pay in the order of invoice due dates.
• Invoice receipt: Payments could be made according to the date of invoice receipt. For example, first-in first-out which pays invoices based on date of arrival.

How Can Companies Optimize Payments

Payment optimization plans often involve the following strategies:

Integrate Invoice Processing Workflow with Payments

Processing invoices with payments on a single platform offers a seamless way to keep track of the status of all ready-to-pay invoices and schedule them for payment. If you can transfer ready-to-pay invoices in bulk, you can also pay vendors faster through batch payments. Streamlining payment batches through automation minimizes manual errors and fraud risks. 

Leverage AI and analytics to identify cost-reduction opportunities

Advanced analytics generates spend analysis per vendor, accurate payment trends, and real-time data that can improve cash flow forecasts. Identify ways to cut unnecessary spending using artificial intelligence that can process vast amounts of data. 

Maximize Rebates 

Payment options like virtual cards offer rebates, providing an additional revenue stream to offset costs with no additional investment. 

Take Advantage of Early Payment Discounts

Vendors often offer incentives to pay early by offering a discount. In addition to maximizing cost savings, you avoid late fees and interest on overdue accounts and can also improve your relationship with vendors. 

Invest in Payment Automation

Automation empowers AP departments to send secure payments in a productive and cost-effective manner. With automation, you can make data-driven decisions, forge stronger vendor relationships, control expenses, and increase efficiency in the AP workflow. 

How Does Automation Solve AP Challenges in Payment Optimization?

Organizations aim to create efficient payment processes. However, roadblocks to fully automated payment processes include:

• Concerns over data sharing between systems and departments
• Changing regulation
• Resistance to change or cost

Automation can effectively address challenges and issues with data security by using robust security measures such as encryption and user authentication to maintain a secure environment. Using automated workflows to replace manual processes also limits access to sensitive information and creates a full audit trail. 

Unlike manual processes that make compliance challenging, automated systems come with built-in solutions to maintain data security and generate reports required by regulation and industry standards. Systems can also be updated or integrated with other software to comply with new requirements without resorting to manual report generation. 

Understanding the return on investment (ROI) for any technology investment is critical. You may end up with a greater return than expected from the cost savings.

Transform Payment Processing With SoftCoPay

Prioritizing efficiency in payments starts with streamlining payment processes, reducing manual tasks, and cutting transaction costs while maximizing rebates. Manage all business spending wisely through a single payment workflow using SoftCoPay.