9 Ways to Improve your Cash Management Systems

November 27th, 2021 Mark Penserini Leave a comment

Cash management is always important, but it’s certainly gotten a lot more attention in the past 18 months. The COVID-19 Pandemic spurred me to realize that the enterprise cash management process has a lot of room for improvement.

Amidst all the uncertainty, companies have to keep a very close eye on cash. At the same time, remote work can make cash management harder. It’s hard to keep track of all the paper the payment process traditionally requires when everyone is working virtually.

When virtual work became imperative, there was a cash management scramble. Suddenly, all eyes were on the amount of time and manual effort cash management required. AP professionals were shuffling back and forth from the office to pick up paper invoices and check stock. AR professionals were trying to figure out how to get to the post office or lock box and get checks deposited to the bank. Invoices and checks could be sitting for many days before they could be processed. It was hard to know what was going to happen and when. The lack of consistency, visibility and control were in plain view.

This pain and urgency caused some people to take action. Cash and paper check payments declined 16% year-over-year in 2020, slipping to 45% of B2B payments. Automated Clearing House (ACH) payments rose above $10 trillion for the first time in history.

We saw a lot of companies fast-track payment automation in response to the COVID-19 Pandemic. Nvoicepay has been in business for 12 years, and a third of our customers signed up for payment automation since the start of the COVID-19 Pandemic. We also saw a 26% leap in vendors in our supplier network hopping off the check-only wagon and reaching out to enroll to get paid by virtual card or ACH.

45% is still a lot of check payments, though. Companies are still sending out thousands and thousands of checks every day. Too much time and effort, and too little visibility and control is still the story wherever check payments are being made. Organizations have simply learned to live with the pain.

Why does anyone tolerate such a painful status quo? Either they don’t know there’s a better way, or they’re so absorbed in managing day-to-day efforts that they can’t imagine a different future or feel it may be too costly to change from the way things have always been done.

There is a better way,

When you stop to consider the full impact of payment automation on cash management, it becomes obvious how much better the future could be:

Reduced process costs. By reducing the cost of making payments you’ll improve cash flow right away. Paper costs go away. All that printing, signing, stuffing, stamping and mailing is replaced by just a few clicks. All payments can be made in a single workflow, instead of the three or four you’re probably running.

Card rebates. When you let go of paper checks, you’ll be able to pay more vendors by virtual card. Virtual card payments can generate rebates, which certainly helps with cash flow.

Less time fixing errors. Payment errors are expensive time-wasters. Even though it only takes about 10 or 15 minutes to fix an error, it adds up. It leads to interruption–you have to stop whatever else you’re doing and fix errors repeatedly.

Fewer hiccups. It takes time to void and reissue checks and get the right amount of money to the right place which complicates cash management. When you automate your payments, you don’t have to go hunting for old checks or piles of invoices.

Less opportunity for fraud. Checks still carry the highest fraud risk of any payment methods. Your bank account and your routing number are right there–no phishing or hacking required. The last thing you need when cash is tight is to have money stolen.

Reduced ACH fraud costs. ACH fraud is rising, mainly through business email compromise schemes (BECs). Effectively managing and safeguarding vendor data might require a lot of IT and staff time. Most companies don’t have the resources to do it effectively. Payment automation companies often are able to do that work for you.

Less time handling inquiries. Payment automation companies can handle vendor and customer questions, further freeing up staff time.

Greater visibility. Cash management is so much more efficient when you can see the status of all your payments in real time. With the right payment partner, you should gain access to detailed reporting and insights on your cash flow.

More flexibility. When you can pay everything electronically, and all it takes is a few clicks, you can time your payments with precision. This precision allows you to let go of trying to manage float.

Though the COVID-19 pandemic put a spotlight on painful, inefficient cash management issues, the reality is that the enterprise cash management process has been struggling for a long time.

Efficiency, visibility and control are the most important facets of cash management. If you’re doing paper processing, you might be missing something important on one of those three fronts. When you take advantage of digital payment methods, automate processes and manage your staff’s time better, cash flow management becomes significantly easier.

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Mark Penserini is the Vice President, Partner Management at Nvoicepay, a FLEETCOR company. He has over 25 years of operational and technical experience specializing in project of management across Healthcare, Finance, and IT operations.

Archives, Banking, Global Trade Daily

How Streamlining Payments Helps Build Vendor Relationships

November 23rd, 2021 Kim Lockett Leave a comment

I’d like to dispel some common misconceptions about B2B payments. First, the misconception that vendors don’t want to be paid by check. Next, let’s dispel the notion that vendors won’t take card payments.

I’ve worked in payments for a couple of decades now. I’ve managed cash handling, check processing, and lockbox operations. I’ve spent the last 10 years or so in the Mastercard B2B space. Based on my experience, I can tell you what vendors really want: convenience and choice.

Doesn’t everyone?

New choices

It used to be that the customer could dictate a payment method and vendors had no choice but to accept. That has been slowly changing. We saw a lot more vendors raising their hands to ask for electronic payments during the COVID-19 Pandemic, but this shift began even before that. Fintech companies have introduced a lot of new payment options, and vendors are more aware that they have choices.

It now falls to buyers to give vendors the convenience and choice they want, without overburdening their accounts payable departments. That means using automation to streamline payment and vendor enablement workflows. AP can then easily accommodate all payment types and let vendors choose what’s most convenient for them.

Different definitions of convenience

When vendors want to be paid by check, it’s often because they have some sort of mechanism that makes it easy to process them. In larger companies for example, that often means using their treasury bank to do lockbox processing for them. Banks will often provide this service for free to win other, more profitable business.

The bank collects all the checks from the lockbox, keys in the data and deposits them. All accounts receivable has to do is absorb a file that has all of the check data. That is a pretty clean process, and a compelling reason to be paid by check.

What about ACH? There’s no paper to handle, and the vendor gets the money faster. Why wouldn’t they want ACH payments? Well, ACH fraud is on the rise, and not all vendors want to risk exposing their banking data to their buyers.

Vendors might actually prefer a single use credit card. The common wisdom against that thought is that vendors won’t want to pay credit card fees. The reality is that virtual cards are gaining in popularity because you get paid fast and fraud risk is low. You don’t have to expose your banking data, and the card number becomes unusable once it’s been processed. For some vendors, that’s worth the fee.

No limits

The point is there’s a market for all payment types. For a buyer to limit themselves to just one or two payment options is to potentially limit whom they can do business with. With all the supply chain problems we’ve been experiencing it’s incredibly important to keep your vendors happy. The best way to do that is to make sure they get paid on time, in the manner of their choosing.

The problem, as many AP teams learned during the pandemic, is that doing electronic payments at scale is a lot harder than it seems at first glance.

You need to have the resources to enable vendors for electronic payments, on an ongoing basis. That means continual outreach to find out which vendors will accept a card or an ACH. It means collecting and verifying their banking data when you onboard them, and having processes in place to verify any requests to change bank account information. It means having a way to know if a virtual card payment hasn’t been processed, and a way of dealing with a card that is still open.

You also need very strong systems and processes in place to protect your organization against ACH fraud. If you’re not up to speed on using technology to validate and secure vendor information, and fend off fraud attacks, you’re putting your organization at risk.

AP teams already tend to be short-staffed. Turnover is high, and the amount of process documentation they have is low. They don’t have the capacity to take on this extra work.

Here’s where it gets good: AP teams shouldn’t have to take on extra work to make electronic payments work. The whole process can be streamlined by working with a payment automation provider. Automation providers typically provide a single workflow for all types of payments. All the person in AP has to do is select who to pay, and the provider will pay each vendor by their preferred method.

More importantly, automation providers take on all the work of enablement, including outreach and safeguarding vendor data. They also indemnify their customers against fraud. It couldn’t be more streamlined–all AP really has to do is click pay.

Convenience and choice for all

Checks have been the prevalent B2B payment method for a very long time, and for some very good reasons. The COVID-19 Pandemic, and our current supply chain woes, have made many organizations reconsider check use.

Vendors are increasingly aware that they do not have to let the buyer dictate how they get paid. Vendors now know that they are able to come to buyers and say, “We’ve got three payment options for you to choose from,”.

Fintech companies are providing new choices for buyers, too. Payment automation lets them offer vendors convenience and choice, without inconveniencing themselves. It’s a win-win, and that is the best possible way to build a relationship.

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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.

Archives, Global Logistics, Global Shippers 101, Global Trade Daily

Global Trade and Logistics: What is the Need of the Hour?

May 26th, 2021 EKA Leave a comment

Global trade management at any given point of time, be it in the past, present or the future has to deal with the complexities of multiple languages, time zones, currencies, taxes, and modes of transport. There are several laws governing global trade, and these are highly complex and ever-changing. So how do organizations manage complexities and what would help?

Current scenario

Organizations must review and act on a heavy volume of regulatory information, which is often published on paper in varying formats and maintained in spreadsheets in organizations. All the complexity in global trade management drives a lot of risk. While these companies want to make the most profitable trades, they must balance counterparty and credit risk. Visibility into the entire trading value chain provides the key to making smarter, more profitable decisions. Raw materials and commodity businesses need accuracy at several levels.

Flow of Information

Companies need a complete view of budgeted and actual trade-related P&L across contracts, shipments, invoices, and payments. They need to ensure documents are accurate and comply with business agreements and have a clear appraisal of all order edits, shipment changes and related documentation.

Flow of goods

Companies need to track shipment and order related activities, manage all information related to the movement of the physical goods, and implement credit checks of all counterparties during contract negotiations, shipment, and invoicing.

Flow of cash

Good cash flow management is essential to profitable trading. Companies must diligently record the flow of letters of credit from creation to final presentment and record and track loans. They must manage resolution flows among multiple trading partners.

Comprehensive and modern solution

Traditionally, global trading organizations spend most of their time and resources manually screening shipments and updating them. The solution should ensure that the process is automated, enabling organizations to screen their shipments more often, more efficiently, and more accurately, ensuring the actual shipment status is reported to the required parties.

In addition, companies should be able to track and trace shipments from origin to destination and boost operational efficiencies. They are aware of delays and deviations and can overcome shipment delays. By comparing costs and charges, companies can determine the best voyage strategies.

These challenges are difficult to master without a comprehensive solution that is simple but has the capability to manage numerous complex global trade activities and is designed to save time and effort, enabling companies to focus on core work. A modern solution that would streamline the entire lifecycle of the supply chain – automating manual processes would help reduce the cost, time, and risks in quantifiable and auditable ways.

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Eka Software Solutions is a global leader in providing digital commodity and risk management solutions, driven by cloud, blockchain, machine learning and analytics.

To talk to Eka experts on trade and logistics solutions write to us on info@eka1.com or register for a free trial.

Archives, Banking, Global Trade Daily

THESE ARE THE U.S. BANKS YOU SHOULD BE TRUSTING WITH TRADE FINANCE AND CASH MANAGEMENT

October 18th, 2020 GT Staff Leave a comment

Global Finance editors, with input from industry analysts, corporate executives and technology experts selected the best trade finance banks in 97 countries and eight regions.

In addition, Global Finance selected the best banks for trade by U.S. region, a list that was based on various service categories, such as document management and export finance.

This year’s winners were revealed during Global Finance’s 20th annual World’s Best Trade Finance Providers awards luncheon on Jan. 15 in Frankfurt, Germany, during the BAFT Global Annual Meeting.

The American winners were:

New England: Webster Bank
Mid-Atlantic: M&T Bank
Great Lakes: KeyCorp
Plains: Commerce Bank
Southeast: SunTrust Bank
Southwest: Comerica
Rocky Mountains: Zions Bancorp
Far West: U.S. Bancorp

Globally, HSBC took the top spot in Euromoney’s Trade Finance Survey for the third year running, with Deutsche Bank in second place and UniCredit in third. Citi fell out of the top three to take fourth position. One of the biggest upsets was JPMorgan, which fell to 17th after reaching ninth place in 2018.

“Many of the American banks have enough trade business in their home market,” explains Eric Li, research director at Coalition. “So it’s no surprise that when it comes to a global survey, European banks will thrive.”

Global Finance editors say the winners are those banks and providers that best serve the specialized needs of corporations as they engage in cross-border trade. The winners are not always the biggest institutions, but rather the best—those with qualities that companies should look for when choosing a provider.

A proprietary algorithm with criteria—such as knowledge of local conditions and customer needs, financial strength and safety, strategic relationships and governance, competitive pricing, capital investment and innovation in products and services—weighted for relative importance was employed by Global Finance.

A DIFFERENT TAKE FROM GREENWICH ASSOCIATES

As of press time, the most recent Greenwich Share and Quality Leaders in U.S. Large Corporate Banking was released during the fourth quarter of 2019.

“For a business that is generally considered stable and rather slow to evolve, large corporate banking is changing fast,” notes a statement from Greenwich Associates. “The globalization of U.S. corporate business coupled with a disruptive trade war, the proliferation of digital technology, the rise of fintech providers, and the strategic retreat of certain global banks are just some of the variables shaking up the corporate banking industry and putting more corporate clients and business up for grabs.”

From April through September 2019, Greenwich Associates conducted interviews at U.S.-based companies with $2 billion or more in annual revenue with 422 chief financial officers, treasurers and assistant treasurers, 441 cash managers and other financial professionals in cash management, and 136 corporate trade finance professionals.

Participants were asked about market trends and their relationships with their banks. Trade finance interview topics included product demand, quality of coverage and capabilities in specific product areas.

THE WINNER’S CIRCLE

The 2019 share list is topped by J.P. Morgan, followed by Bank of America, Wells Fargo, Citi and HSBC—in that order.

The order of the top two changes when it comes to U.S. Large Corporate Cash Management: Bank of America; J.P. Morgan; Wells Fargo; Citi; and HSBC.

“Despite the trade war between the United States and China, the ongoing Brexit saga and other signs suggesting that globalization might have temporarily peaked, U.S. companies actually increased their exposure to overseas markets last year—at least in terms of their banking needs,” according to Greenwich. “For example, the share of large U.S. companies using at least one bank for payments/receivables and/or cash management in Western Europe increased to approximately two-thirds in 2019 from just 58 percent in 2018. The uptick was equally impressive in Latin America, Central and Eastern Europe, and the Middle East and Africa.”

BANKS CHARGE INTO CASH MANAGEMENT

The biggest U.S. banks are placing a new strategic focus on the cash management business. In part, this new emphasis comes from a desire to capture the cash deposits of large companies, which provide a much-needed source of balance sheet stability.

However, banks are also looking to capitalize on an inefficiency in corporate treasury management by creating new client values. International payments, receivables transactions and even corporate cash transfers often trigger a corresponding foreign exchange trade. Some companies put those trades out to bid—but many don’t.

Even for trades up to $20 million in size, many companies simply pass the trade on to their cash management providers. For that reason, margins for FX transactions on the back-end of international cash management transactions can be especially attractive.

U.S. TRADE FINANCE AMONG LARGE CORPORATES

Trade finance is an area of renewed interest by the major banks. Citi, Bank of America and J.P. Morgan all vie aggressively to be the lead trade finance provider among U.S. large corporates, with each bank doing business with just under half of the market. Wells Fargo and HSBC round out the top five banks. Bank of America, Citi, HSBC, J.P. Morgan, and Wells Fargo are all recognized for distinctive quality and share the title of Greenwich Quality Leader.

GREENWICH EXCELLENCE AWARDS

The accompanying table presents the complete list of 2019 Greenwich Excellence Awards in U.S. Large Corporate Banking and Cash Management.

Greenwich consultants John Colon, Don Raftery and Chris McDonnell specialize in corporate banking, cash management and trade finance services in North America. Consultant Chris McDonnell also specializes in digital banking.