The concept of integrated payables has been around for years, but recently, advances in technology and an increase in banks willing to invest have helped to make integrated payables available to a broad range of organizations. Essentially, integrated payables allow an organization to send instructions for initiating multiple payment types—from Automatic Clearing House (ACH) transactions to commercial card payments—to banks in a single, consolidated file. Without integrated payables, finance staff must manually enter various payment instructions into multiple systems.

Rise of Integrated Payables

As more organizations begin to use Enterprise Resource Planning (ERP) systems to link back-office functions, such as financial management, HR, and project management, they're also increasingly using integrated payables. Most ERP systems now incorporate the sophisticated file export capabilities needed for integrated payables, which means that any association with a relatively up-to-date ERP or treasury management system should have the formatting capability required to implement integrated payables.

Banks have also responded to the demand for integrated payables. While the service was once available from only a few of the nation's largest banks, now a number of regional and local banks have sophisticated offerings.

With integrated payables, based on the needs of the payee, a company can pay later and still meet payment deadlines.

Plus, finance managers increasingly view a payment as a payment, no matter the form. Whether they receive wire transfers or credit card transactions, managers want the ability to send all payment types to their bank in one file. They also want the bank to deliver those payments to the right beneficiary, in the right amount, at the right time.

Finance managers also want more transparency in their accounts payable process. Just as courier companies help their customers track packages in real time, finance managers want banks to help them track the journey of their payments, from initiation to settlement.

Benefits of Integrated Payables

Here's a rundown of some of the benefits of using integrated payables:

Lower costs. Fewer staff members are needed for accounts payable payment processing, and it is easier to migrate from paper check disbursements to less costly electronic payment alternatives.

Better cash management. With integrated payables, based on the needs of the payee (such as suppliers or employees), a company can pay later and still meet payment deadlines—thanks to the certainty and immediacy of the ACH process and the extra time that payers receive to fund card transactions.

Better overall efficiency. File-based transaction initiation and reporting can be integrated with ERP, accounts payable, or internal treasury management systems. Integrated payables also support end-to-end automation of the payables process, with the association transmitting all of its payment instructions to the bank in a single file and receiving acknowledgements, confirmations, and information reporting from the bank online.

Foundation for growth. Automating secure file delivery of payment instructions means associations can grow without adding head count in the labor-intensive area of payment processing.

Important Questions

Before you select a bank for integrated payables, be sure to ask:

• What types of reports will the bank be able to provide, and will those reports enable you to reconcile efficiently and maintain strong controls?
• What controls does the bank have in place to ensure secure transmissions?
• How long will implementation of integrated payables take?

Banks have improved the mapping and translation capabilities that they offer, and some associations without Electronic Data Interchange translation software that facilitates data exchange by any electronic means may now be able to institute an integrated payables process. Associations seeking to optimize liquidity, improve cash forecasting, and reduce costs while simplifying reconciliation should consider adopting integrated payables to help them attain these objectives.