Automated Payment Reconciliations Free Time and Drive Efficiency
Payment volumes have seen a dramatic growth in the last decade, along with the number of payment methods available, the type of payment reconciliation required, and increased regulation.
In a recent webinar, Nick Botha, Global Payments Lead at AutoRek, and Steve Murphy, Director of Commercial and Enterprise Payments at Mercator Advisory Group, discussed how automation can help businesses reconcile the gap between the front-end and middle as well as the back-office processes to stay ahead of the curve and manage the volume of payments.
Biggest Obstacles for Payment Operations Teams
Botha pointed out that as the payments space grows, there’s increased competition and increased regulation. Regulators look after the needs of the end-consumers as well as the organizations providing services.
Regulation isn’t the only obstacle payment operations teams face. Payment volumes continue to grow worldwide. Payment organizations are working to better optimize the process of payment reconciliation. They are doing this with automation and by getting rid of error-prone manual processes.
Cross-border payments also come with their own level of complexities. “With cross-border payments, there’s more complex data,” said Botha. “Data is not standardized. This creates huge havoc for the operations teams. There are time delays. Instant payments become more difficult because of the process.”
“When it comes to cross-border payment reconciliations, the structure of the reconciliation themselves must vary and change per different geography,” he continued. “Having a robust but flexible solution that resides within your middle and back office is extremely important.”
The different elements that make up the complexities within cross-border payments include exchange rate differences, time differences, incomplete data, incorrect data entries in internal data, unpredictable charges, and fees. Although automation will not have a direct impact on time differences or exchange rate differences, what it does do is streamline mundane and time-consuming processes. It frees up more time for operations teams to analyze key data and resolve issues faster.
Operation Needs Have Evolved
Much is driving the growth in the volume of payments, including increased competition, how much e-commerce has changed amid the pandemic, and the deluge of payment methods out there.
In 2012, payment volume was low, smaller teams were the norm, and competition wasn’t as much. Today, there are more solutions for automation, more companies that have scaled in size, and more competition. And as teams become larger, more processes need to be managed so that the middle and back offices can handle what’s coming through the front-end offices.
Gaps In Efficiency and Solutions
The most common efficiency gaps organizations struggle with include risk of regulatory breaches, dependency of skilled persons, and an inflexibility to meet regulatory demands.
“You need to make sure you are partnering with the right reconciliation solution,” said Botha. “There’s a difference between a certain reconciliation tool and a tool that can handle all your data, all your processes, your workflows. So, matching what your requirements are versus the partner that you are looking to automate these processes, is an important consideration.”
Botha further emphasized that choosing the wrong partner will create more havoc down the line.
Having an all-encompassing solution makes more sense for organizations looking to simplify their processes. “There’s opportunity to reduce those actual systems that you have to integrate with,” said Murphy.
The Significance of Financial Controls and Reconciliations
According to the data presented, AutoRek shared that as many as 50% of those surveyed are using Excel for accounting. About a quarter are using an in-house system, and another quarter are using a third-party system.
Some businesses don’t feel that any of the existing solutions out there are a good fit for their organization. Therefore, they choose to build their own solution. According to Botha, the issue with that is that most in-house solutions are not equipped or flexible enough to handle industry changes. Handling the massive scale of volume can also be problematic.
Those surveyed were asked what back-office capabilities would give their organization the greatest competitive advantage. An overwhelming majority of 78% said having superior reconciliation disciplines. Roughly 11% of respondents said superior data management. The also said understanding and remaining compliant with global regulations would grant them the biggest competitive advantage.
A Look Ahead
Forward-looking companies must continue to look at their current processes and determine where the gaps in payment reconciliation are. By choosing the right partnerships, businesses will ensure they’ll be able to manage the barrage of payments to come and remain in compliance.