What are Corporate Payments?
Corporate payments or B2B payments refer to the money that is transferred between businesses in exchange for products and/or services. Usually such payments come with an invoice or a pre-signed contract.
What Are Some Common Types of Corporate Payments?
Corporate payments usually include the following types:
- Treasury payments: loans, debts, investments
- Supplier payments or Account Payable (AP) payments: payments a company makes to a supplier for purchased goods or services
- Tax payments: payments to tax authorities to fulfill the legal taxation obligations
- Salary payments: the amount a company pays on agreed terms to its employees in exchange for job performance
Methods of Payment Transfer
Corporate payments, or payments between businesses are usually electronically transferred through banks. In the US and some other countries, checks are still being used, while ACH and wire payments remain the most popular methods. New payment methods such as real-time payments are gaining ground globally. Recently some corporations have also started to accept crypto currency.
Bank transfers can be split into domestic payments and cross-border payments. For cross-border payments, there is usually an associated foreign exchange risk.
How Do Businesses Manage Their Corporate Payments?
It varies company to company, but it is common that the business process owner for payments is treasury under the office of the CFO. Without payments being received on time in the right amount, businesses can face late supplier deliveries or other contractual penalties which endanger all sorts of business activities; therefore the corporate payments process (including claims and accounts payable) is considered as a business-critical process.
However payment processing remains inefficient in many companies, often due to the following reasons:
- Siloed and obsolete home-grown back-office systems
- A lack of end-to-end process automation
- Legacy connectivity to banks
- Decentralized payment processing teams
What Are Some Challenges with Corporate Payments?
Corporate payments are traditionally challenged by their sheer volume of payment activities and manual processing inefficiency. Some of the most outstanding problems with corporate payments are:
- Outdated back-office payment systems requiring extensive and costly IT support
- Long lead time to connect to banks via API or H2H with own IT resource
- Unavoidable payment errors and oversights from manual processing
- Potential money loss from undiscovered duplicate payments
- Increased operational risks due to potential fraud and non-compliant payments
- Slowness to leverage faster payment rails (e.g., RTP®) or other nascent payment methods (e.g., Zelle) to support customers’ evolving payments needs
Cost of Erroneous Payments and Non-Compliant Payments
Perhaps it is not often visible to the stakeholders in a company how much manual and analog systems can cost, or perhaps the practice has been the way it is for so long that it has just become an accepted cost of doing business. Through a step-by-step process description it is possible to demonstrate how much money businesses are losing each year in their payments processing – particularly those with cross-border activities and FX exposure.
Costs can come from a few different sources:
- Manual errors causing remitted funds to not arrive at the correct destination
- Duplicate payments that could be the result of a mistake or fraud
- Non-compliant payments that run afoul of official sanctions lists, leaving the firm open to fines and other regulatory action
Our analysis finds that companies can significantly reduce the erroneous and non-compliant payments that the average business is losing by persisting with outdated processes. If only ten payments are affected each month this can result in extra annual costs of over $40,000 on average.
The following flowchart shows in detail how costly a duplicated payment made by mistake can be for a given company, not to mention that in many cases these errors can be compounded as companies expand organically and by acquisition, adding layers of complexity to find out where and how such mistakes have been made.
The increasingly disparate structures produce more risk, whether FX or regulatory, and greater vulnerability to payment fraud too. Steps to standardize controls and simplify and automate processes can not only mitigate these exposures, but with more accurate information can also strengthen decision-making and lay the foundations for future growth. Below is another detailed flowchart to show how much time and money a company can lose when a foreign supplier payment fails to arrive in the payee’s account.
Use of a Corporate Payment System
A payment hub, also known as a payment platform or a payment system, consolidates payment requests from ERPs and other payment initiating systems, transforming disaggregated and decentralized payment processes into a single source of record for all outgoing payments.
A cloud-based payment hub such as Kyriba’s also enables global real-time access to payment data while as many users as needed can easily be onboarded. This way, the CFO and the treasury team can gain full control and visibility into the status of AP, treasury and other ad hoc payments.
A payment hub can help companies streamline their corporate payments process with great efficiency, cost saving and security.
Best Practices of Managing Corporate Payments
There are many ways to design the workflows and implement the technical enablers needed to optimize your payment process. Many Kyriba clients have demonstrated successes with best practices they share with the community and their peers.
For example, Cooke Aquaculture has built a robust in-house bank and a payment factory to unlock liquidity, freeing 20% of full-time employees in the financial shared service center for more strategic level work. Even more importantly, by placing focus on process standardization, Cooke has seen a result in 100% accurate and automated accounting and reconciliation from a standardized process across all entities.
Another good example is from Kyriba’s client Adobe. As an organization which has 125 global users manually logging into 10+ banking portals on a daily basis to process payments and statements, the use of Kyriba’s payment hub has led to a centralized repository of 24 signers tracked and 8 bank letter templates maintained with 4 Banks connected for bank fee statement reporting and proactive fee management.