In today’s fast-paced business world, there are still many employing tools of the past. Are you one of them? Let’s look at one service available today that should help you save some money and take steps to solve a growing industry problem; recruiting, training and retaining competent team members, especially in the accounting field. Much has been written about the changes that have impacted the hospitality industry in the wake to moves to centralized accounting. The Big Box hotel employing an accounting staff of 10 to 12 is a thing of the past. As a result, these properties are no longer a training ground for producing skilled hospitality accountants. Unless you are in a metropolitan area that is home to several centralized accounting shops, you’re going to be challenged to find good talent with solid industry knowledge. These are the team members you need to get the job done and provide valuable financial information to measure your properties’ performance.
To face this challenge, it is important to evaluate the processes, procedures and tasks performed by your accounting team. Are there opportunities to improve their efficiency by outsourcing non-valued added tasks? One such task is vendor payment processing. In a 2014 Wall Street Journal article by Vipal Monga, it was reported that half of businesses in the U.S. still pay their bills by check. But this percentage is shrinking. In a 2017 survey conducted by the Credit Research Foundation and NACHA, it was found that B2B payments by check were expected to fall from 50% in 2017 to 34% by 2020. These changes signal a shift from traditional in-house vendor payment processing to an outsourced solution. As a result, outsourced vendor payment processing is a fast-growing business services segment that saves time and money. So, who provides those services?
Your commercial bank is one source for this service. Two such banks include Wells Fargo and 5th/3rd. Either through an in-house service center or in partnership with an outside third-party, these banks offer multiple vendor payment options. These options include check, ACH and wire transfers payments. Payments are initiated by transmitting a file generated from your accounting system to an FTP site maintained by the bank. The bank then processes the file and sends payments. Typically, when payments are sent electronically, the vendor will receive an email from the bank to notify them of the payment and provide details necessary for its proper application.
Vendor payment services solutions are also offered by many non-bank providers. These include companies like Paymerang, NextProcess, Tipalti and Corporate Spending Innovations. Initiated in the same manner if using your bank, these service providers will all make vendor payments by check or ACH. But many also utilize a credit card like payment method using a single-use credit card or a ghost card. In these cases, the payment service provider will contact your vendor and encourage them to accept payment by credit card. If the vendor agrees, they also agree to pay a processing fee that is often shared with you and reduces your payment processing cost.
According to Nasser Chandra, CEO of Paymerang, LLC there has never been a better time to outsource vendor payment processing. He notes that check and ACH fraud is growing fast, with phishing scams becoming more sophisticated. Meanwhile, the efficiencies created are significant, allowing properties to focus on their guests and corporate mission. Studies by his company have found that the average payment by paper check costs between $7 and $10 considering check stock, envelopes, postage, printer ink and labor. Outsourced vendor payment processing can reduce those costs to between $1 and $3. At a time when managers are seeking to reduce costs and make better use of available talent, outsourcing vendor payment processing is a direction in which everyone should be moving.