5 Reasons Why Your Siloed Payments Channels Should be Integrated with a Treasury Management System

By Erik Bratt December 6, 2017

Corporations use many different types of system to process their payments, from banking portals and ERPs to AP systems and home-grown solutions. With so many systems in the mix, how can CFOs and CIOs have total confidence in the accuracy of their payments processes?

There are many pitfalls to look out for where payments processing is concerned. Fraud is an obvious one. Companies also need to watch for duplicate payments, as well as making sure that payment files have the correct instructions and valid ABAs or IBANs. At the same time, someone needs to make sure there are enough funds in the account to avoid being overdrawn.

By integrating your payments with a cloud-based treasury management system (TMS), financial leaders can avoid many of these issues and feel completely confident in their payments processing workflows. Here are five reasons why:

1. Be more strategic and add value to the business

When payments are sent to the bank using a variety of different methods, it’s likely that you will have to leave a cash buffer in the account to fund payments that could go out at any time. However, cash that is used as a buffer can’t be put to work.

Integrating your payments into a TMS brings more visibility over your payments, which means you can shrink these buffers. The freed-up cash can then be used to pay down debt, thereby saving on interest costs. Or you can invest the cash and earn interest. And in some cases, companies have even allocated the freed-up cash to fund a new working capital strategy leveraging their supply chain. Together, these options drive hard dollar ROI and is a great way for treasury to add value to the business.

It’s also worth noting that when treasury is running ‘blind,’ this creates a reactive environment, with the team constantly scrambling to solve issues. If your payments are integrated into a TMS, the treasury can be more strategic and get ahead of any issues.

Additional Reading: The Business Case for a Payment Hub

2. Gain full visibility across the payment life cycle

In a non-integrated environment, you don’t have a central view into your payments. This means that you spend a lot of time logging into different portals and payment systems to check the status of approvals and payments. When people request an update on a specific payment, it can take 5-10 minutes just to find out where the payment was made from, identify the supporting documentation, and produce the confirmation number.

With an integrated system, everything is in one place. Treasury staff can access live status updates, as well as documentation relating to the request, in a centralized location.

3. Create a standardized payment policy and support compliance

An integrated environment also supports compliance and enables the company’s payment policy to be standardized, bringing a number of benefits:

  • Consistent process – When payments are integrated with the TMS, those payments all go through the same process – making it easier for treasurers to enforce their payment policy.
  • Fewer tokens – Approvals take place in one location, so there’s no need to keep a key chain of tokens to approve payments on different portals.
  • Lower risk of error – Working with consistent input screens means that the risk of human error is reduced.
  • Early reporting – Payments screening against sanctions lists such as OFAC can also be integrated into the TMS, providing early reporting of any compliance issues that may arise.

4. Take IT out of the file formatting business and reduce bank fees

An integrated environment reduces the need for IT to spend hours formatting files and managing connections between banks and various different payment systems. Instead, these integrations are managed by the TMS.

There’s also a greater opportunity for treasury to operate in a bank-agnostic way. By leveraging the library of file formats within the TMS, you can easily process payments with any bank – meaning you can send payments through the bank that has the lowest fees.

Additional Reading: Making Strides with the Help of Technology

At the same time, you can batch payments from different systems together, limiting the number of files you’re sending and thereby reducing bank fees.

5. Improve fraud and compliance detection

Last but not least, a TMS with fraud and compliance detection can monitor payments across all payment platforms using a rules-based engine. This enables you to identify potential issues in your payment process that might not otherwise be caught, such as:

  • Payments to high-risk countries – Best in class solutions will have an integrated OFAC screening list that will flag payments to high-risk counties before they go out.
  • Payments to vendors whose payment instructions have recently been changed – One technique used by fraudsters is to convince someone inside your company to change the vendor payment instructions, with all new invoices being paid to the fraudster’s account. Such payments can be flagged by the TMS.
  • Abnormal payments to a vendor – For example, the TMS can alert you if a payment is made for $1.5 million when previous 10 payments to the same vendor have been for $150,000.
  • Multiple payments to the same vendor below the approver’s approval limit – This will catch employees who are trying to get around the payment policy.
  • Inconsistent payor/payee countries – A rules-based engine can identify inconsistencies between the country where the supplier is based and the country where their bank account is based.

An integrated environment between your payments systems and your TMS delivers a number of strategic advantages that enable financial leaders to grow their business and gain much-needed peace of mind.

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