Managing accounts payable is a critical component of financial operations for businesses. Efficiently handling numerous invoices and payments can be a daunting task, but with the right process it becomes streamlined and automated. This article delves into the world of payment runs, shedding light on its benefits, best practices, and potential pitfalls to avoid.
Five Practices for Optimal Payment Runs:
- Only Include Approved Payments
An approval process is generally required before a payment run. Making payments without the necessary checks and authorizations can result in the settlement of fraudulent or inaccurate invoices.
- Use an Appropriate Payment Method
The most suitable payment method will vary depending on the size and destination of the transfer.
- Avoid Late Payments
It is imperative to plan ahead and avoid late payment runs. Disorganisation will strain vendor relationships, and missing due dates can lead to late fees, interest charges, and ultimately do damage to a company’s credit rating.
- Communicate With Your Vendors
Timely and proactive communication is essential to any vendor relationship but becomes even more critical when payment runs are involved. The miscommunications that arise when vendor inquiries are left unacknowledged, can quickly spiral into payment failures, disputes, and far greater expenses.
- Arm Yourself Against Fraud
Fraud awareness and prevention tools can help your team steer clear of fraudulent activities like authorised push payments and vendor fraud.
Five Payment Run Mistakes to avoid:
- Inaccurate Data Entry
Even a small error made whilst entering payment details can carry forward into payments that fail or are directed to the wrong recipient.
- Ignoring Currency Differences
The failure to factor in exchange rates and foreign transaction fees when paying international vendors can result in incorrect payment amounts. The payment will require correction and the impression of unprofessionalism may have long term consequences.
- Unreconciled Payments:
Failure to reconcile payments with bank statements and accounting records can lead to discrepancies in financial reports. Postponing this reconciliation process may lead to inadvertent duplicate payments of invoices, either due to oversight or system errors.
- Reliance on Automation
Automated processes can increase efficiency but relying solely on automation may increase anomalies and errors. It is important to maintain a level of manual oversight, particularly if payment runs are scheduled to repeat, as this consistency will compound mistakes.
- Poor Cash Flow Management:
Initiating payment runs without adequate liquidity will result in failed payments. Verifying that there are sufficient funds, and having a contingency plan in case the primary payment method is successful, is a critical step in ensuring that all payments run smoothly.
After a Payment Run is Made:
Following a payment run, there is typically a reconciliation step where payments are recorded in the accounting system and reconciled against the bills that have been settled. Modern accounting systems and payment automation software can automatically reconcile payments and invoices.
It is common practice to send remittance notes or emails to notify a recipient when their payment is being processed. This provides details regarding the bills or other payables that the payment encompasses. This practice is optional but fosters stronger relationships with suppliers and mitigates the risk of miscommunication down the line.
the automated batch processing Solution:
By implementing best practices and avoiding common mistakes, you can ensure that your payment runs are efficient, accurate and support strong vendor relationships
If you are looking to enhance your financial efficiency with payment runs and you have questions about our solution, get in touch and we will be happy to help.