Increasingly restricted access to capital markets and complicated financial regulations are forcing companies to look inward more than ever for funding to support growth. It often falls on the treasury department to find the necessary efficiencies to unlock liquidity, but inefficient and fragmented processes make it difficult.
Standards are established, whether for technology, communications, or data, in part to help pave the way for increases in efficiency in treasury and finance. Consider technology, for example: Many global corporations have standardized processes across their various enterprise systems, including payment centralization.
And while these standards are important, just as important is the underlying data. Without accurate data and seamless access, these processes, no matter how standardized, will create more problems than solutions.
Evolution of Payment Standardization and Centralization
Payment centralization is evolving naturally within organizations, starting with the development of treasury centers, to payment factories, to in-house banking models. Most existing ERP systems already have the functionality needed to extend these models with add-on components. With a more centralized accounts payable (AP) function, for example, corporations can have a more reliable view of payment flows.
The expanded use of ISO 20022, a standard used for payments messaging, is a major player in standardization. It demonstrates how regulation, in this case Single Euro Payments Area (SEPA), combined with technology advancements promotes standardization and increases efficiency. By using ISO 20022 to replace multiple payment formats, corporations can reduce costs involved in needing to maintain those different formats. Some corporations will communicate not only SEPA payment messages in ISO 20022, but also BACS and Fedwire, and leave it to the bank to map these messages to their legacy formats if needed. The added benefit of using ISO 20022 is its inherent capability to expand easily to accommodate unforeseen requirements in the future.
Accurate Data Reigns Supreme
As with any application or message, the full benefit can only be achieved with accurate, standardized data. Reliable payment data, either consumed locally or obtained virtually through the cloud, will propagate across various areas in the system. It is critical that this data is accurate at the source, given that this same data is used to populate messages going through networks that reach partner banks. Errors in this data can lead to payment reversals, which can be costly items for AP to resolve.
Payment data standards also help organizations create more streamlined onboarding for vendors and customers. Improving this process means a shortened time to send and receive payments and increased cash visibility for treasury. Furthermore, the use of standardized payment data combined with standardized messaging formats, all traveling through reliable networks, promotes e-invoicing and allows a company to discover untapped liquidity.
Without accurate data and seamless access, financial processes, no matter how standardized, will create more problems than solutions.
Build a Better Payment Process with Centralization
To learn more about increasing efficiency with payment centralization, read the “Building a Better SAP Payment Process” white paper at www.accuity.com/sapinsider.