The manufacturing and distribution industries have been forever changed by a pandemic that’s created both challenges and opportunities. Supply chains have been disrupted, for example, while demand has surged for a variety of products.
As manufacturers and distributors consider new opportunities, embracing automation will be key. It gives them a competitive advantage over competitors that are still using manual processes. Automation can help improve back-office efficiencies, increase cash savings, decrease costs and increase security against fraud, according to Tom Harmon, president of Commerce Bank in St. Louis. Manufacturing and distribution customers are especially interested in increasing efficiencies these days so they can save money and better serve their customers.
“One of the best ways to do that is to help them automate on both the payables and receivables side,” he said. “Outsourcing that to a banking partner allows the client to free up employees from spending so much time on manual processes. Reallocating those resources toward activities that produce revenue for the company can be a game changer,” Harmon explained.
Taking burdens off employees.
Many manufacturers and distributors are facing a number of pressure points now, Harmon said, including dealing with the personal challenges their employees are facing, working to prevent Covid-19 on the shop floor, reacting to customer demand that can fluctuate wildly and scaling operations accordingly. Finding ways to take burdens off their employees is important.
The Association for Financial Professionals reports there have been some barriers that have slowed the adoption of new payment technologies — such as a lack of information technology resources and difficulty convincing business partners to shift toward different ways of receiving payments — but some are more willing to change during the current health crisis, Harmon said.
“A lot of businesses may have been doing accounts payable the same way for decades because they hadn’t been exposed to the potential efficiencies of automation,” he said. “But during this time of economic uncertainty and new pressures that are on businesses these days, automation makes more sense than ever.”
One way businesses automate is by working with a bank that can take on their accounts payable and receivable processes through the use of an online payment hub. The hub interfaces with the company’s existing accounting system and creates an integrated and automated payment strategy that saves time and money.
From a single payment file, suppliers can be paid by their preferred method. The solution also creates a reconciliation file that goes back to the company, simplifying the reconciliation process. Real-time reporting shows the status of all suppliers and payments through the portal and gives the company an instant look at its cash position, which improves cash management.
“An online solution hosted by a bank immediately adds value to a business,” Harmon said. “And, for those interested in transitioning vendor payments to virtual credit cards, that can result in faster payments, improved relationships and the ability to earn large rebates.”
At Commerce Bank, for example, automating a company’s accounts payable and receivable process starts with a free payment cycle review that can uncover additional revenue that a company may be missing out on if they were to make a virtual card payment to a suppler. If a company is interested in capturing that lost revenue, Commerce Bank asks suppliers if they would be willing to accept a virtual card payment as a replacement to traditional payment methods, like paper checks.
Mitigating the risk of fraud.
Online payment hub solutions are helpful to migrating rising payment fraud. An automation partner provides oversight to mitigate risk and monitor payments.
Accounts payable fraud can take many forms and has devastating financial consequences for a company. According to the 2018 Report to the Nations on Occupational Fraud and Abuse, check tampering, billing and fraudulent expense reimbursements — the three main types of fraud in this area — accounted for nearly half of all reported cases, LedgerGurus reported. It was found that fraud costs U.S. companies a median of $130,000 per business and took a median of 16 months to be detected. During that time, there was about $7 billion in losses and 22% of the fraud cases caused losses to companies of more than $1 million.
“Dealing with paper checks in the office really exposes a company to the possibility of fraud,” Harmon said. “Let the bank do the checks or ACH (automated clearing house) for you and perform oversight on the payments, or get the client moved to the virtual credit card. The more automated and integrated a client is with the bank, the better it should feel about fraud protection.”
Whether you’re looking to earn additional revenue through electronic payment types or completely automate your AP/AR processes, our consultants at Commerce will be there to guide you through every step along your payments journey. Click here to learn more about CommercePayments™.