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How to Create an Enduring Workflow for AR

AR

How to Create an Enduring Workflow for AR

Please note: Vocabulary in the payment automation world varies. While customers (i.e., clients, buyers) and their suppliers (i.e., vendors, beneficiaries, sellers) are both considered customers to payment automation companies like Nvoicepay, this article will use the terms “customer” and “supplier” to distinguish between them.

Imagine having to switch out old railroad tracks while a rusted steam engine thunders across. Adopting modern electronic payments runs about as smoothly for banks.

When you think about how old banks are in the U.S., it’s an understandable plight. They’ve been running on the same tracks since the first bank’s founding. Additional features, like wire payments and credit cards, were added over time as a complement to the old system. But the rise of nimbler financial technology (fintech) companies has lit a fire under them. Now they face the challenge of converting their processes to electronic means without disturbing their clients’ day-to-day business.

In a way, fintechs have it easy. Their very nature makes competing against banks a breeze, primarily because banks were built to last, and fintechs were built to adapt. They can easily shift gears to meet demand and immediate needs. Meanwhile, banks are frequently caught up in bureaucratic processes that make it virtually impossible to react quickly to problems.

Financial and fintech industries feel the contrast most often when tackling payment security—specifically when it comes to cards. Even though check payments incur 25% more fraud instances than card payments, according to the 2019 AFP Payment Fraud and Control Survey, many companies hesitate to make the switch to more electronic means.

Kim Lockett—the Director of Supplier Services at Nvoicepay, a FLEETCOR company—offers a glimpse into why companies are hesitating to shift gears: “Fraud is not a new issue to companies,” she states. “But what we’ve learned is that fear of change overrides the fear of potential fraud loss, even among companies who have already incurred those losses.”

With almost 30 years of experience in payments and financial services, Lockett possesses a holistic perspective on supplier expectations for seamlessly receiving payments, with payment fraud protection listed as one of the highest priorities. She’s heard all the horror stories, from a small business whose checks were stolen out of their mailbox and cashed, to a company whose employee tried to use business deposit information to clear her personal checks.

That’s not to say that errors and fraud don’t occur for card payments as well. But they occur significantly less and are much easier and faster to resolve than check, ACH, and wire payment issues.

What’s the Holdup?

In the last decade, fintech companies have improved the tracks on which many accounts receivable (AR) teams function. From providing lower processing costs for card payments to offering user-friendly portals for reliable payment retrieval, fintechs transform painful AR workflows into a functional process.

Meanwhile, banks have just begun to offer pseudo-solutions that appear to be tech-friendly but still run on old tracks. An excellent example of this is lockbox technology, where banks mitigate the processing of check payments and their data for their larger customers by taking on the work themselves. This sort of offering likely extended the life of check payments. Still, it didn’t eradicate the underlying problem: that even though work has been lifted directly from their customer’s shoulders, someone at the bank still has to process checks and submit data for manual reconciliation. The process is hardly automated, and the advent of payment processing technology has all but made the entire process impractical.

Embracing the Future

Of course, the best way to avoid check issues is to avoid checks. These days, electronic payment methods offer higher levels of security. But if electronic options like virtual card numbers are such a fantastic option, why are so many companies avoiding them?

Lockett states: “In general, I think companies are afraid of handling credit card numbers because they feel there is risk involved.”

It’s not the dangers of check payments, but misconceptions about electronic payments that cause companies to refrain from accepting them. Many AR teams rationalize that they’d rather respond to the inevitable check fraud cases they understand than walk unprepared into the relatively unknown territory of card fraud.

When checks are stolen and cashed, there’s very little that can be done. At the end of the day, someone will be out that money. Other electronic payment types like ACH and wire are significantly safer, but can still experience fraud, especially internal instances, such as when a company’s employee submits their personal bank account information to receive company payments. Whether these issues are reversible is dependent on each unique scenario.

Card payments, particularly the virtual card numbers provided by fintech companies, are typically protected by two-factor authentication. Whether this means that AR is supplied with a login to access secure details or a portion of a card number, the information is much more difficult for bad actors to access, securing the payment process and reducing the risk of fraud.

In the end, not every company will have the capacity to accept card payments, so leaving alternate options open like check and ACH truly boils down to how much individual payment providers value customer service.

Taking Suppliers Along for the Automation Journey

In many cases, banks have rushed to cater to customer’s needs, leaving suppliers in the dust when it comes to follow-through on electronic payments. Despite these efforts to change, most larger banks still follow their old tracks, and their customers and suppliers experience the same lack of customer service they always did.

With over 10 years of support development behind them, fintechs have expanded their offerings to suppliers, catering to their specific needs, whether they require something as simple as customizable file formats or a more significant request like payment aggregation. Fintechs that follow through with supplier support are truly delivering on their promise of offering an end-to-end solution. They are building tracks that support the advanced bullet trains that companies have become.

“Ten years ago, companies were reluctant to add virtual card payments to their list of accepted payment types,” says Lockett. “Education, experience, and word-of-mouth have established virtual card payments as a mainstream and relevant way to conduct business.”

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Alyssa Callahan is the Content Strategist at Nvoicepay, a FLEETCOR company. She has five years of experience in the B2B payment industry, specializing in cross-border B2B payment processes.

Millennials

Millennials To Become Richest Generation — Here’s What We All Need To Know

Data shows that many millennials don’t have it easy compared to their parents’ baby boomer generation. Onerous college debt, tight wages, expensive real estate, and high insurance costs are big challenges they face and ones that weren’t as formidable to boomers when they were in their 20s and 30s.

But thanks to the wealth that baby boomers will pass on to their children, life will get easier for a sizeable percentage of millennials. They are expected to inherit $68 trillion from their baby boomer parents by 2030. That total is spread among 45 million U.S. households, according to a report from research firm Cerulli Associates.

Amid the biggest generational wealth transfer in U.S. history, however, financial planner Jeannette Bajalia says there are many important factors that both generations and financial advisors must consider to make the transfer go smoothly and avoid issues that could harm the financial legacy.

“Inheriting money is wonderful, but managing an inheritance can be difficult and risky,” says Bajalia (https://www.womans-worth.com), founder of Woman’s Worth®, an insurance and financial professional for four decades and the author of three books.

“Boomers, especially women, are worried about events that could take a big bite out of their children’s inheritance, such as long-term care and market corrections. And many financial advisors have to get up to speed on how to best serve millennials — a very different generation that looks at money management a much different way — while at the same time helping steer both generations in the right direction.”

Bajalia offers these tips to help boomers, millennials and financial advisors navigate the biggest generational wealth transfer ever:

Boomers: Start the inheritance conversation with your children. Studies have shown that heirs often blow through an inheritance quickly. This squandering can stem in part from being uninformed by their parents about the details of the estate. “It’s imperative to have that conversation with your children,” Bajalia says. “It can help your children make informed decisions, and bringing an advisor into the conversation adds structure and family trust. Parents should discuss priorities they had and impress upon the heirs how to handle the inheritance responsibly. If there is an indication of money management issues with the heirs, an estate planning attorney will need to add provisions to the legal documents in order to manage the distribution.”

Millennials: First, don’t rely on inheritance as an instant problem-solver. The inheritance shouldn’t be used as a new source of daily income, but mostly for the big picture. “With many millennials behind on retirement savings, a healthy inheritance is a way to kick-start it,” Bajalia says. “This is a great chance to pay down some college debt. Cash and other assets can help your future in numerous ways, but generally it’s wise to consult an advisor to learn about taxes and about how to construct a long-term plan including investments, particularly if the inheritance had IRAs as part of the pot. You can get back in the driver’s seat with an inheritance only if you don’t get in a hurry and take ill-advised risks.”

Advisors: Adapt to the first digital generation. Millennials were the first digital-savvy generation, making them a much different type of client to advisors compared to their boomer parents. They often educate themselves online about products. “Advisors need to learn how to connect with their clients’ children,” Bajalia says. “The younger generation expects a much different service experience than their parents did. They want better communication, convenience, integration of their financials through online portals, and readily accessible products — overall a customized experience.”

“Inheritance can be a life-changing event,” Bajalia says. “But so much depends on how the younger generation protects it and invests it. Boomers want to leave their children the best legacy possible, and advisors have a great opportunity to be that steady bridge between generations.”

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Jeannette Bajalia (womans-worth.com) is the founder and president of Woman’s Worth®, where she specializes in the unique needs of women as they plan for retirement. She is also president of Petros Financial Group and is an Investment Advisor Representative with Petros Advisory Services, LLC, a registered investment advisory firm. She has authored three books — Planning a PURPOSEFUL Life, Wi$e Up Women! A Guide to Total Fiscal and Physical Well-Being, and Retirement Done Right! An Ed Slott Master Elite Advisor and recognized as one of 20 Women of Influence by The Jacksonville Business Journal, Bajalia has over 40 years of leadership experience as a business owner and insurance and retirement income planning professional.

She has appeared on CNBC and Growing Bolder as well as in the Wall Street Journal, Forbes, Yahoo! Finance, Bloomberg Businessweek, USA Today, Retirement Daily, and the Jacksonville and Orlando Business Journals. She completed her graduate and undergraduate studies at the University of North Florida, and was selected as one of the 2019 Women of Distinction by the St. Johns County Girl Scout Council.

Three Expense Policies You Should Consider Revisiting

“Are you reallygoing to reject that expense report because of that?” We ask our customers this question all the time — and guess what, they usually say “Nope.” They’re just adhering to their company’s travel and expense (T&E) policy without really considering the context of the expense. Many T&E policies we’ve seen are outdated. More often than not, these policies were either put in place when the company only had a handful of employees traveling or they were based on industry standards that haven’t been revised in over a decade. With business travel on the rise, it isn’t just the overall reimbursement amount that has increased, but also an increased burden on employers to audit these expenses.

From our experience implementing our AI-powered expense audit solution for over 1,000 companies, we’ve identified three expense policies your company should seriously consider revisiting.

‍Don’t be too strict on meal spend

$10 limit for breakfast, $15 for lunch, and $25 for dinner – this is the standard policy most companies have around meal expenses, but how often do auditors truly follow this? It’s becoming increasingly common for auditors to approve expense reports that don’t stick to these strict guidelines, as long as employees don’t go over the overall daily limit of say, $100. We recommend setting an overall daily meal limit or per diem rather than a meal-based one. This change will ensure that your auditors are paying attention to the expense reports of employees whose behavior they actually want to address, rather than focusing on someone who spent $5 extra on lunch, for example.  

Give your employees more time

T&E policies usually require expenses to be submitted for reimbursement within 90 days of incurring the expense. Let’s say an employee submits a receipt that’s older than 90 days. It’s likely that this expense just slipped the employee’s mind or they just found it while cleaning out their suitcase. Are your auditors really going to go through the trouble of asking the employee why they didn’t submit the receipt earlier? Probably not. There are various reasons for delayed submission, but usually, the employee is given the benefit of the doubt. We recommend increasing the permitted expense age to 180 days to give employees more time to submit their expense reports and decrease any potential back-and-forth between employees and auditors.

‍It’s okay to enjoy a glass of wine once in a while

Sure, no one wants their employees getting drunk on the company dime, but it isn’t uncommon for employees to sip a glass of wine at dinner – especially when they are traveling on business, away from their families, and eating all by themselves in the hotel lobby. Okay, I didn’t mean to paint such a dampening picture, but it’s quite true! Expecting companies to pay for a drink used to be a complete no-no in the business world, but today, companies are more flexible about alcohol. So, either allow it up to a certain dollar amount, say $100, or track an employee’s behavioral trends over time without interrupting the reimbursement process.

Those are just a few of the ways you can change your expense policy to help reduce the stress on both your auditors and your employees. For more ideas on how to best structure a T&E policy that promotes a healthy expense culture, download our whitepaper.

Cauvery Mallangada is an Implementations Manager at AppZen, the world’s leading solution for automated expense report audits that leverages artificial intelligence to audit 100% of expense reports, invoices and contacts in seconds.

AND THE ENVELOPES, PLEASE

What do a U.S. manufacturer, a Swedish retailer and a South African pharmacy chain all share in common? Hillenbrand (U.S.), ICA Group (Sweden) and Dischem Pharmacies (South Africa) battled it out with four other global firms recently at the 2018 Supply Chain Finance Awards.

Held Nov. 29 in Amsterdam, sponsored by global financial institution ING and organized by the Supply Chain Finance (SCF) Community, a global entity of professionals, private firms and knowledge institutions, their annual awards not only recognize achievements in the larger SCF world but also promote greater unity and collaboration as it grows and matures.

With industrial value chains becoming increasingly complex, manufacturers in 2018 relied heavily on interlocking supplier networks. More actors equate to increased risk, principally because parties do not know one another, and many times they are working across time zones and borders where physical relationships are nearly impossible to foster. Through shared new research and best practices, the SCF Community is helping to reduce complexity and risk and keeping cash liquid, something that benefits both sides of a transaction.

A typical contract is comprised of a buyer and a supplier. Each have distinct interests but both desire at least one thing in common: optimized cash flow. This produces a natural conflict as the buyer seeks to delay payment (to retain their cash) and the seller needs to release the product and invoice the buyer to receive payment as quickly as possible. With SCF, there is a third actor added to the mix–the funder or financing institution–which buys receivables or invoices at a discount from suppliers. The suppliers get their cash quickly and the bank then deals directly with the buyer.

The SCF process encourages collaboration instead of fomenting competition, which is a natural extension of a relationship where both parties desire the same, individually advantageous outcome. And SCF works even better when the buyer possesses a superior credit rating to the seller. A savvy buyer will use this to negotiate better terms from the seller, but the seller can also capitalize immediately by selling its receivables to the financing institution for immediate payment.

 

SCF at a Glance

It is useful to understand the SCF concept at a macro level because it does a lot of things but not everything. As such:

1. Not a loan – For the supplier, a true sale of its receivables is on the books, so supplier finance is simply an extension of the buyer’s accounts payable. Thus, the process is not considered a financial debt.

2. Multibank capacity – More than one financial institution can take part in the process, which adds a tremendous amount of flexibility.

3. Not factoring – In most circumstances, the supplier receives payment on the invoice (minus a standard transaction fee). Once the invoice is settled, there is no recourse burden on the supplier.

4. Equal opportunity – The beauty with SCF is it provides value not just for large companies but firms of all sizes (and credit ratings). This also includes SME suppliers.

 

The Awards

The 2018 Supply Chain Finance Awards jury, composed of the leading minds from the Fraunhofer Institute, the Luxottica Group, Nestrade S.A. and Metso, had its hands full this year. On the Transport & Logistics side, Kuehne + Nagel Group took home the award for Best SCF Solution. The Swiss-based holding with 1,336 offices worldwide and more than 75,000 employees had bested DHL Global Forwarding, Panalpina and DB Schenker in accounting for roughly 15 percent of the word’s sea and air freight business revenue.

This year, Logistics Kuehne + Nagel added an SCF layer on an already efficient Tradeshift e-invoicing platform, which now provides an unparalleled amount of transparency with regards to invoice status as well as all relevant SCF information. For small and medium-sized suppliers, early payment options are critical, and the Kuehne + Nagel solution gives them the ability to create invoices quickly online, which can result in payment within a matter of days.

The cash-conversion cycle lies at the heart of the matter with, again, both buyer and seller seeking to either maintain liquidity or add liquidity as soon as possible. The jury recognized Kuehne + Nagel’s ability to not only improve on this cycle but also advance the relationship between buyer and supplier, a natural win-win and one that the SFC Community seeks to foster. Kuehne + Nagel works with Citi to offer early payment options to more than 16 North American and European countries, spanning eight currencies. Asian and the Middle East are next for 2019.

Speed is crucial, and this is an area where Kuehne + Nagel set itself apart, having been recognized in the 2017 Adam Smith Awards in the category “Best Trade/Supply Chain Finance Solution.”

To stay abreast on news surrounding the 2019 awards, visit the regularly updated SCF Forum website: www.scf-forum.com/venue.html.

The Most Tax Friendly Country? Canada, Says Report

Ontario, Canada – Canada remains the world’s most tax friendly country for global business, according to KPMG’s Competitive Alternatives 2014: Focus on Tax report.

Canada’s top international ranking, the international business consultancy said, “is mainly due to low effective corporate income tax policy combined with moderate statutory labor costs, as well as the country’s system of harmonized sales taxes.”

The United Kingdom ranked in second spot with Mexico landing in third in terms of tax competitiveness. The study also revealed there is no standard approach in setting tax policy among the countries analyzed.

Although the types of taxes used to raise government revenues are more or less similar among countries, it found that “there is a large range in how these taxes are weighted and applied.”

Some countries, it said, “have a tax policy focused on delivering a low corporate income tax rate in order to compete for more businesses. Those countries may need to rely more heavily on other taxes, such as sales or payroll taxes, to derive their tax revenues.”

Similarly, other countries “use their tax policies to attract certain types of businesses with targeted incentives for activities such as manufacturing or research and development.”

The countries were scored based on their TTI, or Total Tax Index, with the US, which ranked fifth on the list, providing the benchmark at 100.0.

For example, an overall TTI number of 51.6 means total tax costs are 48.4 percent lower in that country than in the US.

Spotlighted countries given as examples were Canada (53.6 percent); the UK (66.6 percent); Mexico (70.2 percent); The Netherlands (74.5 percent); the US ( —); Australia (112.9 percent); Germany (116.3 percent); Japan (118.6 percent); Italy (135.8 percent); and France (163.3 percent).

 

06/26/2014