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Why Every Retail Business Needs Professional Accounting Services

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Global Trade Daily

Why Every Retail Business Needs Professional Accounting Services

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Running a retail business requires a lot of hard work, dedication, and attention to detail. One of the most important aspects of managing a retail business is ensuring that your finances are in order. Proper accounting is critical to the success of any retail business, as it provides accurate and timely information about the business’s financial health. 

While some retail business owners may attempt to manage their finances on their own, professional accounting services can provide a range of benefits that can help to streamline operations, increase profitability, and ensure compliance with tax laws and other financial regulations. In this article, we will discuss the reasons every retail business needs retail accounting services.

Business finance man calculating budget numbers, Invoices and financial adviser working.

From tracking sales and expenses to managing inventory and taxes, accurate retail accounting is essential for informed decision-making, compliance with financial regulations, and achieving long-term financial stability. Let’s delve into the significance of actual accounting practices in the retail industry and the benefits of hiring professional retail accounting services to ensure smooth financial operations for your retail business.

Common Pitfalls in retail accounting

A retail organization’s financial stability and success may need to improve significantly from common retail accounting mistakes. 

1. Sales and revenue tracking issues:

Failing to record all sales and expenses can cause distorted financial statements, misleading financial ratios, and incorrect tax reporting. 

2. Cash flow management issues:

Cash flow management issues, inventory management and tracking issues, sales and revenue tracking issues, and tax and compliance issues are common challenges retail businesses face in their accounting practices. These issues may arise due to a variety of reasons, such as slow-paying customers, unexpected expenses, or mismanagement of funds. Cash flow problems can result in a range of negative consequences, including an inability to pay bills or employees, missed opportunities for growth, and damage to a company’s credit rating.

3. Inventory management and tracking issues:

Accurate inventory management is critical in the retail industry to ensure optimal stock levels, prevent stockouts or overstocking, and maintain profitability. However, tracking and managing inventory can be challenging, especially in businesses with large or complex inventory systems. Issues such as inaccurate tracking of inventory levels, stock discrepancies, and obsolete or slow-moving inventory can cause stockouts, overstocking, decreased sales, increased carrying costs, and decreased profitability.

4. Tax and compliance issues:

A crucial component of retail accounting is tax compliance. Retail enterprises must abide by complicated tax requirements and pay various taxes, including sales, payroll, and income taxes. Penalties, fines, and legal problems may occur from problems including erroneous tax calculations, inability to collect and return the proper taxes, insufficient record-keeping for tax, and non-compliance with tax legislation.

Benefits Of Professional Retail Accounting Services

Professional retail accounting services can offer several benefits to businesses. 

1. Expertise in industry-specific accounting practices:

Retail accounting can be complex and require specialized knowledge of industry-specific accounting practices. Professional accounting services with experience in the retail industry can provide expertise in inventory accounting, cost of goods sold (COGS) calculation, sales and revenue recognition, and cash flow management. This specialized knowledge can help ensure accurate financial reporting and compliance with industry-specific accounting regulations, resulting in more reliable financial statements.

2. Enhanced accuracy and efficiency:

Professional retail accounting services can improve the accuracy and efficiency of accounting processes. Skilled accountants can record and track financial transactions, reconcile accounts, and generate financial reports. This can minimize errors, reduce the risk of financial misstatements, and improve the overall efficiency of the accounting function. Accurate accounting practices can help businesses make informed decisions based on reliable financial information.

How Professional Accounting Services Can Help Retail Businesses

Professional accounting for retail businesses can play a crucial role in supporting the financial success of retail businesses. With their expertise in industry-specific accounting practices, accuracy and efficiency in financial record keeping, and ability to provide valuable financial insights, accounting services tailored for the retail sector can be a game-changer for businesses in this competitive industry.

1. Specialized knowledge of retail accounting practices:

Retail accounting involves unique challenges and requirements, such as inventory accounting, cost of goods sold (COGS) calculations, and sales and revenue recognition. Professional accounting services with experience in retail accounting are well-versed in these specialized practices, ensuring accurate and compliant financial reporting. This expertise can help retail businesses navigate complex accounting rules and regulations specific to the industry, mitigating risks of financial misstatements and non-compliance.

2. Improved financial analysis and decision-making:

Professional accounting services can provide retail businesses with valuable financial insights through financial analysis. These insights can help to formulate growth strategies and make strategic business decisions.

3. Time and cost savings:

Outsourcing accounting services can save retail businesses time and money. Retail business owners can focus on their core operations and growth strategies while leaving the accounting tasks to the experts. By leveraging the expertise of professional accounting services, retail businesses can reduce the risk of errors, streamline financial processes, and optimize costs associated with in-house accounting staff and systems.

 Choosing the right retail accounting service

Selecting the right accounting service provider is crucial for the financial success of any retail business. 

1. Expertise in retail accounting:

Look for accounting service providers with experience and expertise in retail accounting. Retail accounting involves unique challenges and requirements, such as inventory accounting, cost of goods sold (COGS) calculations, and sales and revenue recognition. Ensure that the accounting service provider deeply understands these specialized practices and can provide tailored solutions for your retail business.

2. Industry knowledge:

Consider whether the accounting service provider knows the retail industry, including trends, regulations, and best practices. This industry knowledge can be valuable in providing relevant financial insights and guidance specific to the retail sector.

3. Services offered:

Evaluate the range of services the accounting service provider offers. Besides traditional bookkeeping and financial reporting, consider whether they provide additional services such as tax planning and compliance, financial analysis, payroll processing, and other relevant services that benefit your retail business.

4. Technology and tools used:

Consider the technology and tools used by the accounting service provider. In today’s digital era, advanced accounting software and tools can significantly streamline financial processes and improve accuracy. Ensure that the accounting service provider uses up-to-date technology that aligns with the needs of your retail business.

Questions to Ask:

1. What experience do you have in retail accounting?

2. What technology and tools do you use for accounting?

3. Can you provide references or testimonials from retail clients you have served?

4. What are your pricing and contract terms?

Conclusion

Accurate retail accounting is crucial for the success and sustainability of retail businesses. It helps ensure reliable financial reporting, compliance with industry-specific accounting regulations, and informed decision-making. 

Partnering with a reputable accounting service provider specializing in retail accounting can significantly benefit retail businesses. By outsourcing accounting functions to professionals with industry-specific knowledge and expertise, businesses can minimize accounting pitfalls, improve financial analysis and decision-making, and maintain compliance with tax regulations. Retail businesses must prioritize accurate retail accounting as a strategic investment for long-term success.

Author’s Bio

Jessica Flores is an accomplished blogger with several years of experience in the accounting and bookkeeping industry. With her extensive knowledge and expertise, she is an accounting specialist at a leading outsourced accounting firm Cogneesol. Throughout her career, she has developed a keen interest in sharing valuable insights related to accounting with her engaging and informative write-ups.

 

 

 

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Archives, Banking, Global Trade Daily

Check use drops, but still plenty of room for efficiency gains

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AFP, the Association for Financial Professionals released the 2022 Payments Cost Benchmarking Survey underwritten by Corpay. The survey looks at external costs such as bank/payment provider fees, reporting, interchange for credit cards, etc., and internal costs such as personnel, technical equipment, IT support.

Treasury and other financial professionals can now compare their costs of making and receiving seven types of payments–check, ACH credits and debits; wires; credit and debit cards; real-time payments, and virtual cards–against benchmarks for similarly sized companies. This is useful information for identifying areas for optimization and in making the business case for further automation.

This time around, the cost of incoming payments has also been segmented by tender type, a recognition of the fact that impact to vendors should be part of the equation when implementing a new payment strategy.

Survey Says…

This survey was completed about 18 months after COVID-19 began and reflects the acceleration of electronic payment adoption driven by work from home policies. The typical organization now reports processing between 500 to 999 checks per month and 1,000-1,999 outgoing payments via ACH Credit. In 2015, the median number of checks processed per month was 1,000-1,999 while the ACH Credit median was 500-999 per month.

Data collected from nearly 350 accounts payable professionals confirms that paper checks are considerably more expensive than all electronic payment methods except for wires. Even though the survey found high awareness of the cost of checks compared to electronic methods, 92% of organizations continue to accept them.

Survey results indicate that despite lower overall check processing median transaction cost for issuing a paper check range between $2.01-$4.00 per check

Increased efficiency was the primary reason cited for transitioning to electronic payments (92% of respondents), compared to 82% of respondents that cited cost reduction. This marks a shift in focus; according to the 2019 AFP Electronic Payments Survey—released well before the pandemic hit—the top three drivers were cost savings, fraud controls and better supplier/customer relations. Efficiency in terms of speed and ease of reconciliation were ranked 4th and 5th respectively in 2019.

Fraud remains a top concern, with 67% citing fraud concerns as a primary driver for electronic payment adoption. Fifty five percent of organizations with revenue greater than $5 billion said the move was part of a larger workflow automation project.

Despite the new focus on efficiency, results from this year’s survey suggest that paper checks are not going away anytime soon. Despite nearly two thirds of organizations saying they would replace paper checks with electronic payments if there was a cost benefit, 37% of all respondents said they would continue to use paper checks regardless of costs.

The report cites the ubiquitous nature of checks, tradition, the challenges of converting vendors to electronic payment methods, and longstanding systems and routines as enduring obstacles to change. This thinking, along with other internal Corpay market research, suggests that many organizations remain unaware of changes in the payments market that could help them achieve greater efficiencies, cut costs and better prevent fraud.

Our take:

-Card payments remain underutilized. Procurement, T&E and virtual card processing can be easier to automate as vendors often have systems in place to capture data from ERP and procurement systems. As treasury and payments professionals continue to focus on tightly managing working capital , credit cards can be a very valuable tool. Organizations should evaluate their average cost of capital, cost of credit, and credit terms, and the opportunity cost of accepting/not accepting cards when evaluating them as part of an overall larger payments strategy.

-The adoption of virtual cards in particular is still relatively low—23% across all respondents. Virtual cards offer all the working capital benefits–including rebates–associated with traditional credit cards. But since these single use cards can only be used by the specified payee in the specified amount, they offer unparalleled protection against fraud. Considering the focus on fraud prevention, virtual cards warrant a more prominent place in organizations’ vendor payment strategy.

-The 2019 AFP Electronic Payments Survey reported that the cost to convert customers from paper checks to electronic payments was the number one drawback to conversion. This cost was not considered in the Benchmark survey, but treasury and finance professionals are well aware of the ongoing manual labor involved in enabling vendors for electronic payment. What they may not be aware of is that Fintechs such as Corpay have large, cloud-based acceptance networks and take on that effort on behalf of their customers.

-The study looked at seven different payment methods. The majority of companies are using at least three but some may be using all seven. That means they are likely running several discrete payment workflows. Where that is the case, they could achieve further efficiencies with a payment automation solution that consolidates all payment methods into a single workflow.

-Companies with annual revenue between $1-$4.9 billion are the heaviest users of wire payments, which can cost up to 12 times as much as a check. This is likely due to an organization with a global footprint that is sending more wires to vendors overseas. Companies this size may not yet have a global operations infrastructure and access to local payment systems and banking partners. These companies could benefit from a payments partner specializing in cross-border payments.

As the Benchmark survey notes, the cost to receive a check is typically half of what it is to issue one, and large AR departments have efficient, often touchless processes in place for processing them. Prior to the pandemic, that meant vendors often did not feel the same sense of urgency to digitize payments.

During the pandemic, convincing vendors to accept digital payments became a much easier discussion as both parties were motivated to move to an electronic format while their teams were working remotely. That created a tailwind for the move off paper checks, which has been far slower than anticipated in North America. Streamlining your payment process and migrating to less expensive, more efficient payment methods should be your priority for 2022.

By Corpay, a FLEETCOR company.

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Archives, Banking, Global Trade Daily

Why the Players That Focus on Both Sides Will Win the B2B Payments Market

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Remote work initiatives have created a strong tailwind for digitizing business payments, with companies rushing to move away from checks and onto card and ACH payments. This huge market–roughly 10 times the size of the consumer payment market–is ripe for change. Over the past decade, a decent amount of investment has gone into this area. Everyone is getting into the game: banks, card providers, and fintech providers, for example. It’s very early days, with paper checks still the predominant form of payment in the US. Who will win the market? Ultimately, it will be the players that can best address the needs of both buyers and suppliers.

I’ve spent time on both sides. Before coming to Nvoicepay, which helps automate the payment process on the accounts payable side, I was with Billtrust, which automates accounts receivable. Their founder and CEO, Flint Lane, was a big believer in the need to solve for both sides of the equation. That was my first introduction to the concept. Now, having sold into both accounts receivable and accounts payable, I’m a firm believer as well.

Two Sides of the Coin

There are two sides to every payment—creation and receipt. When it comes to consumer payments, both sides are straightforward, especially with today’s technology. But in the world of business payments, process complexity adds friction between them. Accounts payable’s goal is to manage cash flow by hanging on to money as long as possible. That puts them at odds with accounts receivable, who wants to get paid as quickly as possible. Digitizing transactions doesn’t efficiently address the complexity or friction between the sender’s and receiver’s processes. And the lack of consideration can worsen the issue.

For example, funds sent by accounts payable may hit their vendor’s bank faster with card or ACH payments, but a complicated payment application process can lose the receivable department precious time anyway. Without a way to streamline the process from beginning to end, simply switching to electronic means in a few places may not offer the time savings that businesses hope to achieve.

What’s the Solution?

Portals work well for larger companies that can dictate the terms of doing business to their smaller customers. But their customers may not be happy having their own interests dictated to them. And if you don’t have that kind of authority, chances are your portal will go unused because you’ve created a one-off process for your customers, making life harder for their accounts receivable people.

Electronic means can help accounts payable make payments at the last minute, and they’d prefer paying by card over ACH because they can make money on card rebates. But convincing suppliers to accept card is often a challenge because the accompanying fees can get expensive very quickly. Meanwhile, enabling suppliers for ACH translates to AP managing large amounts of sensitive bank account data.

Many organizations end up “dabbling” in electronic payments because of these enablement challenges. That leaves them managing four different payment workflows–card, ACH, wire, and a whole lot of checks. This is the problem that payment automation providers solve by taking on the supplier enablement process, maximizing card rebates, and simplifying AP workflows.

As much as both sides might agree that digital payments are the future, they’re stuck between a rock and a hard place without automation.

Paving the Way

Fintech businesses like Nvoicepay and Billtrust are bringing automation to payables and receivables separately, and that’s a big step forward. I believe the next generation of solutions will bring both worlds together on a flexible, dynamic platform where both parties to a transaction can choose from a range of options that best meet their needs at any given time.

From an accounts receivable perspective, funds need to be accompanied by enhanced digital remittance information. They could offer buyers incentives in dynamic discounts in exchange for speedy payment and a streamlined cash application process through the platform.

On the buying side, easy access to supply chain financing could allow them to take advantage of such discounts while at the same time extending payment terms. The buying organization takes its two percent discount and gives half a percent to the financing organization, paying the invoice within the discount window. Then the buying organization pays the financing organization in 30 days. Payables manages cash, gets part of the discount and a rebate if they pay by card.

Bringing it All Together

The key to creating these win-win outcomes is including the presence of a technology platform that uses data to offer convenience and choice, allowing organizations to meet whatever their needs happen to be at any given time. For example, if your cash position is good, you may not offer discounts or offer them more selectively. If you work with many small suppliers with tight margins, consider taking the card option off the table.

These are not new ideas, but they haven’t yet been addressed effectively with technology. Historically we’ve tried to do this through EDI (Electronic Data Interchange), a computer-to-computer communication standard developed in the 1960s. It’s always been very clunky, and it is unwieldy for the volume and velocity of data in the supply chain today. However, a majority of organizations still use it for lack of anything better.

Nacha and the Real-Time Payments Network add remittance data to ACH payments, but that’s not a complete answer. There still needs to be some technology put in place to incorporate the data into payment workflows.

Suppose you look at fintech innovation in the consumer payments market as a leading indicator. In that case, it’s been less about new payment products and more about using technology to send and receive money seamlessly, regardless of which electronic network is used.

In B2B payments, fintechs changed the game by thinking about payments as a business process rather than a collection of products, and built software solutions to automate those workflows. With remote work providing an additional incentive, many more organizations are adoping electronic forms of payment. That, in turn, makes data more available to continue developing digital platforms. Whoever gets there first has a good chance of becoming the leading player, but you won’t get there at all if you don’t build for both sides of the equation.

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Derek Halpern is Senior Vice President of Sales for Nvoicepay, a FLEETCOR Company. He has over 20 years of technology sales and leadership experience, including 16 years in the fintech and payments space. 

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Archives, Banking, Global Trade Daily, Special Reports

How to Adopt a Powerful Approach to Vendor Payments

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Spurred by the need for remote work capabilities, companies today are trying to move from manual processes to electronic vendor payments. This transition is easier said than done. On the face of it, electronic payments seem more efficient but, without the proper tools and partners, they can end up causing more work. It pays to think about electronic payments from a holistic perspective from the start to avoid this roadblock.

An efficient payment process is one in which you can send a single payment file–containing all your payments–to a payment automation provider, without it requiring any additional follow-up. If you have any questions or need to check on payment there should be one centralized place where you can view all that information while your payment partner handles any payment errors that occur. Linear and simple!

A far cry from efficient

That is a far cry from what happens when you don’t have the right tools or partners in place. Many companies try to piece together different products for different payment types. They may choose a banking partner for sending ACH payments, an outsourced check printing firm, a credit card partner, and a tool for automating the payment approval process.

Seems simple, right? All you have to do is call up your bank or enterprise resource planning (ERP) provider. No request for proposal (RFP) process is required; no need to run vendors and contracts through legal and compliance. Even if each partner can only handle one or two pieces of the process, it seems easier than finding a new partner to handle the whole thing from end to end (which is not as complicated as it sounds, to be fair).

Adding these electronic processes to your back-office as separate elements may feel like a quick, inexpensive way to move to electronic payments, but it could come back to bite you. This patchwork approach creates more inefficiencies that surface pretty quickly and have to be addressed by the accounts payable (AP) team on an ongoing basis.

No time to optimize

It is easy enough to launch a card program, but there is a lot that goes into optimizing that program on an ongoing basis. You will be responsible for contacting vendors to see if they’ll accept payment by card and maintaining a responsive contact at that company that is willing to run the card when prompted. AP teams rarely have time to do that, making their card programs less successful and often below the levels of rebates they were expecting.

Security can also be an issue with in-house card programs. When you’re managing a card program in-house, you’re probably using purchasing cards or T&E cards rather than virtual cards, which likely means you’re not keeping cards secure.

In my role at a previous company, I was the person responsible for running those (unfortunately insecure) card payments. We kept copies of customers’ credit cards in an unlocked drawer. Whenever they were ready to pay, we would go into the drawer, pull the card number and run through our terminal or portal. That’s a pretty common setup, and it’s nowhere near as secure as a virtual card. Also, if the card number changes or is hacked you will need to communicate that to every supplier who has been running your card, adding additional hours of work to your team.

Managing an ACH program poses many of the same challenges. Reaching out to vendors to get them on the program, collecting, and keeping up with changes in banking information is a lot of work that usually nobody has spare time for. Also, storing vendor banking information in a way that is compliant can be tedious and has a lot of red tape. Working with a vendor that is already SOC compliant can save time and money. Few organizations can keep up with all the technology and training needed to prevent ACH fraud, which is the fastest-growing form of payment fraud.

Routine complications

Teams may also find that routine payment runs are more complicated with a piecemeal setup. Instead of running one payment file every time, you’ve got to work with three different systems and partners that aren’t communicating with each other–four if you’re also making cross-border payments. You’re managing too many relationships and projects, and anytime you need data to research a payment you’ve got three different places to look.

There are some banks that offer full AP, but they’re not actually technology providers. They’re just running your payments through one or more vendors and charging you a premium for it. Since banks are not the actual service provider, any time you have a question or a problem, they’re going to have to take it to the service provider and then get back to you. You’re adding time and another layer of communication. Not to mention you probably won’t get the same level of services–payment indemnification, fraud protection and error resolution–from most banks or software providers either, but you can with a payment automation provider.

A scalable approach

Arguably the biggest challenge with electronic payments is vendor enablement–getting vendors set up and then managing their payment data on an ongoing basis because vendor data is dynamic. Neither a bank nor a collection of providers is a large-scale vendor network. According to Nvoicepay internal data, about 25% of your vendors will change their information each year. You’ll need someone on your side to manage those changes.

Our platform is powered by the cloud, making managing a vendor network scalable. Cloud-based payment providers can handle the data all at once on behalf of all their customers that pay that vendor. If the payment provider enables a vendor for card payment, that vendor is enabled for card payment for every customer that pays them within our network. By leveraging the payment provider’s network, you can pay far more of your vendors electronically with no extra effort on your part.

Vendor payments are a process. Up until the last decade or so, we didn’t have technology that could address the whole payment process from end to end. There was no “Salesforce for payments.” All we had was a collection of different payment products. Each of the payment products required a certain amount of manual work on the front end to be able to send the payment and on the back end to reconcile and fix any errors. There was a tremendous amount of inefficiency.

Today, you can hand off all that work to one company–a company that specializes in vendor payments and customer service, and has the process down to a science, using technology to automate as much of your process as possible. Implementation takes just a few weeks. It requires a few hours of IT time, your vendor list, and an hour or two of initial training. The final step in simplifying your entire AP process is sending one payment file and letting your partners handle the rest. Now that’s real efficiency.

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Maggie Schroeder, CPA is a Senior Solutions Consultant at Nvoicepay. She previously worked as an accountant, as an auditor for Deloitte, and as a consultant helping small to medium-sized businesses find partners for business and AP automation software.

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Archives, Banking, Global Trade Daily, Special Reports

How Remote Work Lends Itself to Reshaping the Back Office

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The pandemic has been hard on everyone in different ways, and though the end is in sight, we’re not there yet. But, as we close in on a year and a half of working from home, we can look back with some perspective and perhaps a little pride at how we’ve adapted and changed. During this time, many people and organizations have discovered that they’re much more nimble, creative and resilient than they previously imagined.

I can see that in the accounts payable organizations with whom I have worked. The dual challenges of figuring out how to get payments out the door in a different way and learning to work remotely have been daunting, but people have figured out ways to get the job done.

Perhaps more than any other function, AP used to be a strictly in-the-office job, mainly because of all the paper processes they had in place. Invoices come in the mail. They have to be opened and keyed into accounting systems. Some companies have machines and OCRs (Optical Character Recognition) to help with this process, but many still follow manual processes. Checks must be printed, stuffed into envelopes, and run through a postage meter before they’re mailed. Security and controls are often paper-based, too—safes are kept for blank check stock and sensitive information.

It seems incredible to think that a year and a half ago, that was business as usual for the vast majority of organizations, and not many had plans to change. But change they have.

A New Way of Thinking

Nobody had a plan for sustained remote work. They may have had a short-term disaster recovery plan—for one or two people to work offsite or cover for the absence of a key employee. But nobody had a plan for the entire AP team to be out of the office indefinitely.

The initial struggle was to be able to continue processing payments on time. People brought their laptops home, but not their whole setup. They kept sending skeleton crews to the office to handle the paper processes. The thought was that we’d have to stick it out for a short period. We all know how that turned out.

Around the latter part of April 2020, we started to see people planning for the longer term. Companies set people up with home offices and all the security and connectivity they needed. They had to figure out new ways to communicate and collaborate. They had to figure out how to be productive at home, in many cases while juggling childcare and homeschooling.

At the same time, they started switching vendors to ACH payments in earnest. According to recent data from Nacha, the National Automated Clearinghouse, B2B ACH payments to vendors jumped a whopping 11 percent in 2020. They had to figure out new processes and new ways to keep information secure. Both of those are heavy lifts, which is a big part of the reason paper has persisted for so long.

It has been challenging to say the least, but I think that AP teams should be proud of how they’ve adapted.

Where to go from Here

Probably not back to the office—at least not five days a week. According to a recent report by Upwork, roughly one in four Americans will be working remotely in 2021. By 2025, 36.2 million Americans are expected to be working remotely, an 87% increase from pre-pandemic levels. A survey by the Pew Research Center found that given the option, more than half of employees say they want to keep working from home even after the pandemic abates.

Employers are becoming comfortable with the idea and are even finding some advantages, including access to a much larger talent pool and the ability to offer flexible work hours as a benefit. That could help AP to address the long-standing talent shortage.

The more significant opportunity, though, is to continue to think differently. I would be surprised if very many AP departments decide to return to the paper processes of old. The biggest reason people stuck with those for so long was that they were “working.” It’s hard to say that now. It’s also hard to say that accounts payable work can only be done in the office because we’ve been doing it outside the office for a year. The considerable delay in payment processing that some people expected never materialized. AP had to find a better way, and they did.

Moving Forward

They shouldn’t stop there. AP organizations should seize the moment to bring in technology partners to automate the entire payment workflow, address the growing fraud and security risks associated with ACH payments, and ensure the resiliency of payment workflows in a remote work world. They should be looking to automate invoice ingestion and processing and integrate into other transactional systems, eliminating manual work once and for all.

Nobody likes being forced to change, and that’s been perhaps one of the most difficult aspects of the experience we’ve all been living through for the past year. Now that AP teams have proven they have the resiliency and the ability to handle all the change that was thrust upon them, they should seize the opportunity to become drivers of change and key players in leading their organizations into the future.

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Kim Lockett is Vice President of Customer Success and Services for Nvoicepay, a FLEETCOR company. She has more than 30 years of experience in payments, with a heavy focus on back-office operations and customer engagement. Prior to Nvoicepay, Kim held operations management and leadership positions with Comdata, Crestmark Bank, and Regions Bank.

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Archives, Banking, Global Trade Daily

Safety First: How to Handle Supplier Banking Data

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2020 was an eventful year for business payments. We saw expansive leaps in digitization, accompanied by new challenges. Remote work forced accounts payable departments to pay more suppliers electronically, primarily by ACH or direct deposit. In many cases, companies began making ACH payments before they could adequately secure remote networks and environments and without new protocols and procedures to ensure the secure handling of supplier bank account information. The rush to pay suppliers electronically in the new remote environment exposed them to various fraud schemes, targeting ACH payments. While ACH fraud was already on the rise, cybercriminals exploited the pandemic and the rapid shift away from paper check with greater voracity than ever.

Knowing the increased risk with ACH payments is critical when you receive requests to change bank account information. According to our internal data, these requests are common, with suppliers changing bank accounts roughly every four years. But change requests are also the most common avenue for fraud, specifically VEC (Vendor Email Compromise). In this type of attack, criminals hack into supplier systems, monitor invoice flow, identify a potential weak spot among the supplier’s customers and then reach out to someone in accounts payable to request a bank account update. Often, they time this sort of change just ahead of a large payment.  If successful, they route the payment to an account they’ve set up only to close it once they receive the funds.

AP teams stay vigilant when they receive requests to change banking information. But really, they always need to handle bank account data securely. If this data is intercepted, it gives fraudsters fuel to make their schemes more credible. IT departments need to secure company networks and environments. AP departments need to have stringent, repeatable processes for collecting, validating, and storing the information.

Collecting the data

Start with identifying the information you need to store. In addition to the routing, account numbers, and other remittance information, you may want to add security questions or other uniquely identifying information.

This information should never be transmitted via email, which is extremely unsafe. It’s shocking how open people are with the information they share using that communication method. There’s a lot of naivete surrounding the notion of business email compromise, or BEC. The FBI documented over $26 billion in reported losses from BECs between June 2016 and July 2019. According to the 2020 AFP Payments and Fraud Control Survey Report, BEC schemes were the most common type of fraud attack last year, with 75 percent of organizations experiencing an attack and 54 percent reporting financial losses.

With such attacks on the rise, banking data really should be sent via a secure portal or encrypted email. It’s tempting—especially at the beginning of a new supplier relationship—to want to extend trust and make enabling them for payment fast and easy. Don’t do it. Safety comes first. Make it clear to your supplier that you’re doing this to protect their company and yours. They should understand and appreciate that—it’s a yellow flag if you encounter pushback on that request. While it’s uncommon for Vendor Email Compromise (a subset of BECs) to occur during initial onboarding, requests to make exceptions to processes (especially if combined with a sense of urgency) are hallmarks of phishing or fraud attempts. Make sure your team is well trained, so alarm bells go off in that scenario.

It’s not just during the supplier enablement process that this information needs to be protected. Suppliers routinely send invoices that include bank routing and account information via email. Again, this is well-intentioned—the aim is to make it easier for the customer to pay them, but it’s also risky. Using a secure portal is the best solution.

When accepting sensitive information over the phone, be sure to have phone validation procedures in place to ensure the person you’re talking to is an authorized representative of the supplier.

Validating and securing

When you’re setting up a relationship with the supplier for the first time, AP should work with procurement to validate all the contract information. They may also want to use a third-party tool or service provider that connects into banking networks to validate and authenticate account identity and ownership. There are many such tools on the market.

If you’re switching an existing supplier from check to ACH, you may already have some visibility into their banking data as another way you can cross-check their information before making changes.

Once validated, information must be securely stored. Where housed on paper, companies should implement a level of physical protection such as locked in a file cabinet, but we know files are often kept in a folder on someone’s desk or—in the age of remote work—someone’s car or home. Many companies keep supplier data in spreadsheets. If someone were to intercept that information, it would be in peril.

When storing supplier banking information in an ERP system, ensure access is tightly controlled through strict permissions workflows and frequent audits of current user activity.

As traditionally check-heavy companies rush to meet the demands of electronic payments, they may miss critical steps necessary to safeguard supplier banking data and should partner with their IT, Security and Compliance teams to build a robust system of access, monitoring, and review. Outsourcing the responsibility to a payment provider is another consideration to make where resources and skillset are limited.

With the pace of change and new security threats upon us, focus on worse-case scenarios may leave you feeling helpless and overwhelmed. Preparation is key to successfully managing change. Identifying these scenarios will help you predict and prepare for the challenges and pitfalls ahead as you safely transform your accounts payable flow.

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Angela Anastasakis is the SVP of Operations and Customer Success for Nvoicepay, a FLEETCOR Company.   She has more than 30 years of leadership experience in operations and product support. At Nvoicepay, Angela has been instrumental in leading Operations through rapid growth, while maintaining their 98% support satisfaction rating through outstanding service.

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Archives, Banking, Global Trade Daily

Uncover New Opportunities from a Return on Experience

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The pandemic, though terrible, has given us much-needed time to pause, reflect, and perhaps make some changes to the way we live our lives. We have a chance to reevaluate what is really important to us. What brings us happiness? What drains our energy? What experiences add meaning to our days? Which ones take it away? We have an opportunity to face this challenge in a way that makes us better people.

Businesses are on a parallel path. With the diminishing of old norms comes the possibility of reimagining our old processes. That has brought about an acceleration of technology adoption across virtually every industry. Still, there’s another storyline emerging as well—the rise of what Heather E. McGowan calls The Human Capital Era. McGowan believes that the workforce has exhibited incredible resilience and creativity during the pandemic. They’re “an asset to develop rather than a cost to contain.”

I’m all for it.

Everyone knows the term “return on investment”—or “ROI”—meaning you get more monetary value out of something than what you put into it. But money is not the only measure of value. As we take stock of our business and personal lives, I think we should re-establish a lesser-recognized concept: return on experience.

Return on experience is significantly more objective than a return on investment since the measurement varies by opinion rather than hard numbers.

For example, we all have gone out to have dinner and found that the bill was more expensive than expected. Maybe the food was just so-so, you had a long wait time, or the server was brusque. Whatever the reason, it just wasn’t a great experience. But you might gladly pay twice as much for dinner where the food is delicious, or the service is kind and attentive. That’s what I think of as return on experience—getting value beyond what money can buy.

We embrace this concept more easily in our personal lives, where there’s less accountability for how we spend our money. For example, pre-COVID, I enjoyed traveling with my wife and two kids. Those trips were expensive, even after accounting for the hotel points and airline miles I’d collected. But the memories will stay with us forever, long after the cost has been absorbed and forgotten.

When you think about your business and your accounts payable team, what is the return on experience from antiquated methods like processing checks? What is the opportunity for growth? One person can’t cut or sign checks much better than another. There’s a limit to the impact you can have by stuffing checks in envelopes every week. It’s the opposite of a good experience.

Incorporating automation in your back office is a good way to tackle ROI and ROE simultaneously. When you have removed mindless tasks from your AP team’s plates, they are free to spend their energy on more interesting, strategic, and valuable tasks. I think that’s an initiative that’s well-aligned with the Human Capital Era.

As we re-examine our lives and our businesses, let’s remember what it means to evaluate something in the first place: to judge or calculate the quality, importance, amount, or value of something. And in that calculation, consider the return on experience in terms of your business, beyond money. It’s about setting yourself and your employees up to live and work in a high-quality environment—one that encourages personal and professional development.

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Derek Halpern is Senior Vice President of Sales for Nvoicepay, a FLEETCOR Company. He has over 20 years of technology sales and leadership experience, including 16 years in the fintech and payments space. 

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Archives, Banking, Global Trade Daily, Special Reports

Why is the Supplier Experience Important in Payment Automation?

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It’s a difficult time to be a supplier. As companies conserve cash amid difficult economic conditions, suppliers are often the ones who feel the financial strain. Payment terms get extended. Buyers seek to renegotiate contracts to optimize their processes and adapt to new solutions. But then their suppliers are left out of the discussion until they’re presented with their marching orders.

Even though a company’s first responsibility is to its bottom line, it cannot afford to forget that suppliers are ultimately responsible for their ability to deliver revenue. It’s especially important right now that companies take care of their suppliers for the supplier’s benefit as well as their own.

Nightmare Scenarios

If suppliers don’t get paid in a way that works well in their processes and systems, it causes many nightmares for their accounts receivable team. Those nightmares can spread throughout the organization, causing stress and frustration. That frustration sometimes manifests as a conflict between buyers and suppliers. In my prior finance roles, I saw my fair share of suppliers who went to great lengths to make their dissatisfaction known, from verbally assaulting my unsuspecting colleagues to threatening lawsuits.

When suppliers go to these lengths, it’s because they’re desperate for action on the buyer’s part. In today’s environment, their distress is twofold. Payment amounts that seem negligible to buyers make a significant difference to suppliers. The constant flow of payments from AP to AR teams has slowed as companies conserve their funds as long as possible. The ebb and flow of this process has always been present—it’s how many companies do business. But this year, suppliers are feeling the strain more than usual.

Increased Collection Pressure

In 2001 and during the Great Recession, we saw that when the economy struggles, finance departments add aggressive collections specialists to their accounts receivable teams to collect overdue money from their customers, relationships aside.

In my experience, AP people are helpful, conscientious, and tough. They have to be, as the liaison between their company and its suppliers. Right now, they’re on the front lines, battling to conserve cash. If past downturns are any indication, they’re currently bogged down with calls, and morale is dipping as the number of irate callers spikes. What’s worse, that stress and emotional exhaustion can cause high turnover rates, which in turn leaves companies in a constant state of training new-hires—a drain on already-limited resources.

From a strategic standpoint, if you’re not getting payments to suppliers in a way that’s conducive to their operations, they could go out of business. They might also choose to stop working with your company altogether. To them, not all customers are ideal, and as more of them abuse the “customer is always right” notion, suppliers have to withhold the benefit of the doubt and act in self-preservation.

I’ve experienced both positive and negative aspects of the financial battle. On the one hand, I’ve negotiated with large retailers who ground businesses down to the thinnest margins. Smaller companies who rely on their enterprise customers to stay afloat are often forced to accommodate them, knowing that they are expendable and replaceable. Conversely, I’ve worked with a global manufacturer that valued its supplier relationships and would only offer early payment discounts and supply chain financing if they knew it would benefit the supplier. This company holds stress-free, decades-long relationships.

When suppliers don’t get paid on time, they may decide to deprioritize the offending customers. By becoming a nuisance in their process, your supply chain could feel the impact. Ultimately, this translates to your inability to generate revenue.

Buyers Care

Fortunately, more companies seem to value their supplier relationships than not. I recently participated in a third-party study to understand what potential payment automation buyers value the most about adopting such a solution. Supplier experience took the third spot after efficiency and fraud protection.

Supplier experience appears in our buyer persona research too. When I meet with customers, they want to ensure that we treat their suppliers well. It’s not only part of the company culture they wish to instill in all of their relationships, but they also worry about the impact on their AP team and the supply chain if something goes wrong. They understand any economic impact on their suppliers ultimately translates to higher prices.

Supplier Experience Now

Supplier experience has always been a crucial part of our value proposition as a payment automation solution, and why we continue to focus on building upon the improvements we have already implemented.

We have a dedicated team that supports suppliers on behalf of each customer. Because many customers share the same suppliers, we act as the main point of contact for all of them, which reduces the number of touchpoints a supplier must make to resolve payment issues or update contact or financial information. At the same time, we’re flexible. Some of our customers have invested deeply in their supplier relationships, and they still prefer to be involved in communications. In those cases, we don’t have to be the single point of contact. Suppliers can contact us or their customer’s AP team—whichever suits them.

For suppliers with hundreds of customers in our network—which is common in verticals such as automotive, construction, and technology—we even offer consolidated payments. For example, we combine all their incoming payments into one deposit and supply a data-rich file for easy reconciliation, right down to the customer and invoice level. This data is delivered either through our payment portal or by email.

Creating a Satisfying Experience

At Nvoicepay, we’re always looking at new methods for supporting customers and suppliers alike. It’s our goal to offer better payment products, faster payments, and more real-time data. Our most valuable report cards take supplier opinions into account, and we are proud to consistently receive satisfaction ratings above 98% from the suppliers who interact with us.

Buyers have immense power over suppliers, and sometimes they press that advantage hard. As a payment automation provider, we advocate for and support our customers—the buyers. However, we have found that supplier advocacy results in measurable success for all parties involved.

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Josh Cyphers is the President of Nvoicepay, a FLEETCOR Company. For the past 20 years, Josh has managed successful growth for a variety of companies, from start-ups to Fortune 100 companies. Prior to Nvoicepay, Josh held leadership roles at Microsoft, Nike, Fiserv, and several growth-stage technology companies. Josh is a lapsed CPA, and has a BS in Economics from Eastern Oregon University.

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Archives, Banking, Global Trade Daily

Survey Finds Dramatic Increase in Overdue Payments in North America

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Will North American businesses remain resilient in the face of COVID-19 challenges? That answer is increasingly difficult to answer in the affirmative, as virus containment measures continue to negatively impact trade, consumer spending, industrial production, unemployment, corporate debt and supply chains.

According to the annual Payment Practices Barometer survey of businesses in the U.S., Mexico and Canada by trade credit insurer Atradius, companies are facing widespread cash and liquidity pressures. Survey data was collected this spring, and conditions have likely deteriorated further. News recently broke, for instance, that the coronavirus caused the U.S. economy to contract 32.9% in Q2, the worst contraction in modern history.

Needless to say, the bleak economic outlook puts businesses in an extremely tight spot, and it is likely insolvencies will rise dramatically, further exacerbating liquidity challenges among organizations in the supply chain. Some troubling signs of deteriorating payment practices and B2B customer credit risk captured in the survey include:

-Overdue payments have increased dramatically. Across the region, 43% of the total value of issued invoices remain unpaid by the due date, a sharp increase from the 25% reported last year.

-The value of invoices overdue by 90 days or more has doubled to 13%.

-Businesses write off 4% of the total value of outstanding invoices, up from 3% in 2019.

The increase in payment defaults is particularly alarming in the U.S., which saw a 72% year-over-year uptick compared to 2019, and in Canada, which saw an 86% increase. In Mexico, the amount of trade receivables firms have written off has doubled since last year.

These trends put a troubling burden on businesses, which end up having to spend more time, resources and funds chasing down overdue invoices. It also means working capital is tied up for longer than before, limiting businesses’ abilities to pay their own suppliers and make strategic investments. In short, rampant late payments cause a bad domino effect, spreading liquidity issues all throughout the supply chain.

UMSCA Firms Are Tightening Credit Controls

Faced with heightened B2B customer credit risk, many businesses across North America are tightening their credit control procedures, the Payment Practices Barometer found.

Firms typically rely on a mix of outsourced risk management, such as credit insurance, and internal tactics such as reducing risk concentrations and increasing debt collection resources. Notably, more than half of the region’s survey respondents plan on upping the efficiency of their debt collection processes through tactics such as payment reminders or outsourcing collections to an agency.

The Payment Practices Barometer also found that while credit-based B2B sales are on the rise across the region, the trend is slowing. Self-insurance against the risk of payment defaults also saw an increase – 66% of businesses rely on this tool compared to 22% last year.

The most prevalent methods of credit control vary by country:

-Many Canadian firms are planning on adjusting payment terms to better align with the credit capacity of customers – average payment terms are now 26 days, compared to 27 days in 2019. They also widely employ payment reminders and work to avoid concentrations of credit risk.

-In Mexico, a significant proportion of businesses employ credit insurance. Additional popular credit management tactics include suspending deliveries until outstanding invoices are paid, requesting payment on cash from B2B customers and requesting payment guarantees.

-U.S. firms focus more on credit management than their peers in the region. A large majority of U.S. businesses manage customer credit risk in-house through self-insurance. Requiring payment guarantees prior to sales and offering discounts for early payment are also widely used tactics.

UMSCA Businesses Remain Hopeful?

Despite the bleak economic outlook and all signs pointing to widespread liquidity issues, the majority of businesses surveyed in North America predicted growth in the coming months, their optimism rooted in the belief that banks will continue to provide credit to cushion the effects of poor cash flow.

But again, that was a few months ago, and business conditions are rapidly changing for the worse. Consumer sentiment, for instance, has fallen back almost as low as in the early days of the outbreak – optimism that COVID-19 will go away any time soon is now a distant memory.

The only thing that can be said for sure is that the business environment in North America is rife with uncertainty with no indication of sunnier skies in the near future. More than ever, businesses need to take a strategic approach to credit management that ensures adequate cash flows and a solid liquidity position.

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Gordon Cessford is the president and regional director of North America for Atradius Trade Credit Insurance, Inc

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Archives, Global Trade Daily, Software, Special Reports

Don’t Get Caught Off Guard by Expired Contracts

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Contracts are key to mitigate risk, secure discounts, and acquire services. Your procurement teams work hard to negotiate contracts that enforce the most beneficial terms for your company, and your AP team takes careful measures to ensure each invoice is paid on time. However, one section of the contract that’s often overlooked by finance teams is the expiration date. Surely your supplier will let you know when it’s time to renegotiate, and someone’s tracking it somewhere, right?

The truth is, in many organizations, the expiration date of a contract is often completely unknown. An expired contract can have serious ramifications to your business functions and could cost you a lot if you’re unaware of its pending arrival. Below are a few scenarios that can happen if you’re caught off guard by expired contracts.

Where are our contractors?

If you fall out of contract with your contractors, the first thing you might notice is that they simply don’t show up. This may not be a huge issue on temporary projects such as landscaping, but if you’re relying on them for long-term IT support, this could be a big issue: A few weeks of contract renegotiations can slow down your business significantly. Staying ahead of contract expirations allows you to renegotiate terms before they expire, to ensure there aren’t any gaps or delays in your projects.

Hmm, this seems more expensive than usual

If your supplier contracts expire, they’re no longer obligated to honor the price you negotiated. They can suddenly begin to charge their market rate, which is likely substantially higher than the contracted rate. This would be an unwelcome surprise for any finance team, especially if it’s after you’ve already purchased the goods (and perhaps even used them as components within your product). After a contract is expired, you lose all your leverage to find an alternate supplier, and the cost of your goods can rise exponentially. Avoid this supply chain nightmare by knowing in advance if you need to renegotiate your prices.

I can’t afford my new subscription price, but can I afford not to have it?

Contracts often include a clause that limits cost increases upon renewal, typically around 3-5% or covers the cost of inflation. However, if the contract expires, this clause will no longer be honored. Let’s say your business is using an ERP or CRM software on a six-year contract. During that timeframe, the software company raised its annual fee from $400K to $3.5M. Unfortunately for your company, you didn’t renegotiate the contract before expiration, and you now have zero leverage to negotiate a better price. Even worse, the cost of switching may be equally high, so it doesn’t make sense to look for alternative software. Your company has no choice but to pony up the money in order to keep your business functioning on all cylinders.

The above scenarios would be tricky for any business to avoid. With so many contracts with so many different suppliers, it can seem impossible to be aware of each upcoming expiration date. However, AppZen’s Contract Audit notifies you of all of your upcoming expirations (and coupled with AP Audit, you can also be confident that your contract terms are reflected on each invoice too). Thanks to AppZen, you’ll be notified with enough time required to make a decision on alternative suppliers, saving you costly mistakes, and keeping your business and supply chain running at 100% efficiency.

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David Wishinsky is a Senior Product Marketing Manager at AppZen.