Just like any CEO or finance executive, you understand the importance of managing your company's finances effectively. And part of this is ensuring, that any payments of bills run smoothly, error-free, and in a timely manner.
To get you started with the most important groundwork first, you can implement these tips that help you reduce costs and improve the efficiency of your bill payment processes, ultimately benefiting your bottom line.
#1 Automate as Much of the Bill Payment Process as Possible
Automating your bill payment process means that you utilise new technology to handle tasks such as sending payments, reconciling accounts, and tracking expenses, thereby optimising your operations.
But the benefits of automation go beyond just saving time and resources: If done well, you also reduce the risk of human error, which can lead to costly mistakes such as missed or late payments. It can also improve the accuracy and security of your financial data, helping you make more informed decisions about your business.
To make this more tangible for you, briefly reflect about the state of bill payments automation of these processes in your business:
- Sending payments: Instead of manually writing and mailing paper invoices checks, use electronic payment systems to automatically send payments to vendors. Do this well and you will save time, resources, and reduce the risk of missed or late payments.
- Reconciling accounts: Instead of manually reviewing and reconciling financial records, use finance management software to automatically track and reconcile bank accounts. This way you do not just realise time savings, but also reduce human errors, and maximise insights into your company's financial health.
#2 Consolidate Your Bill Payment Methods Into a Single Platform
On average, business owners juggle between five to eight different methods to pay their bills. Crazy? We think so too! Fix this by centralising your bill payments in a single platform:
- All-in-one place: By consolidating your payment methods, you gain significantly more visibility into your outstanding bills. You will find it easier to track and manage your payments, and reduce the risk of missing or forgetting payments.
- Automatic reminders: In a central platform you can also set up automatic reminders and alerts to help you stay on top of your bills. The benefits? Avoid late payment fees and penalties, while maintaining excellent supplier relationships.
- Track and manage: A key pain point in managing your cash flows are disparate payment systems. Consolidating your payments simplifies your cash flow controlling. With all your payments in one place, you quickly see how much money you have available to balance invoices, which helps you avoiding overspending or overdrafts.
#3 Use Electronic Payments Whenever Possible
In 2023, paying digitally should be a no-brainer. Unfortunately, cash and cheque payments still have significant distribution among business' payment methods. Electronic payments are faster and more secure than paper checks, and they usually come with lower fees.
While electronic payments are widely used, there may still be situations where a manual payment or paper check is necessary: For example, if a vendor does not accept electronic payments, like paying in a physical store that only accepts cash or purchase on invoice (Kauf auf Rechnung). In these cases, it's important to make sure that the payment is processed correctly and on time to avoid any potential issues.
#4 Take Advantage of Early Payment Discounts
Many vendors offer discounts for early payments. Under current economic circumstances, many suppliers operate under a Cash is King principle, making them even more open to reward your for being a good customer. By paying your bills early, you can save money on your expenses and improve your operating margin.
Of course, not all vendors will offer early payment discounts, and the amount of the discount may vary. But it's worth checking with your vendors to see if they offer any discounts for early payment, and if so, how much you could potentially save.
#5 Negotiate With Vendors for Lower Fees and More Favorable Payment Terms
Or, in other words, run through your supplier database by largest vendors and check if you can renegotiate incoterms (a fancy expression for payment terms, such as payable in 30, 60, or 90 days).
Assume you partnered with a particular vendor for many years, and have always paid the vendor's standard fees for their services. However, the business has recently noticed that other vendors in the same industry are offering lower fees for similar services. Ta-da, you have become the margin-bearer of that supplier by not renegotiating fees diligently, essentially financing their business at the cost of your bottom line.
In this case, you should approach your current vendor to negotiate for lower fees and more favorable payment terms. Pro-tip: Try to lock in the reduced fees for multiple years, to avoid index-price-adjustments due to inflation.
You are in a win-win situation here. If the vendor is not willing to negotiate, you can still consider switching to the other vendors that offer lower fees and more favorable payment terms.
Just remember: These negotiations require proper preparation on your side: It's important to approach these negotiations in a professional and respectful manner, and to be prepared to walk away if necessary. To get started, pull list of all your vendors and the spending for each vendor. You find this data as part of your consolidated bank statements, ideally in one of your Multibanking applications.
#6 Review Your Bill Payment Workflows Regularly to Identify Areas for Improvement
"Did you just suggest to do a process evaluation?" — Yes! However, the good news here is, that as finance admin or executive, this case study will take you just a few minutes of your valuable time
First, gather data on the current bill payment processes, such as
- the number of payments made each month (find this in your centralised finance management platform),
- the average time it takes to process a payment (start the timer when the next bill payable lands in your inbox and stop it once it is readied for your accounting),
- and the number of errors or missed payments (this you should really have top-of-mind at any time).
Next, the analysis. You might find that there are areas where your process is inefficient or prone to errors. For example, a significant number of payments might be made manually instead of using an automated approval process.
Based on these analyses, businesses develop plans to improve their finance operations., such as automating more of their payment workflow or consolidating their payment methods in one single platform. By regularly controlling and optimising bill payments, businesses save time, money, and resources in the long run, boost operations, and ultimately benefit their bottom line.