Companies face a number of challenges when it comes to managing payments processes effectively. For one thing, there is typically no global owner for payments within an organization. In addition, many companies also lack technology that can standardize their payment processes.
“What you end up with is a lot of departments working independently to figure out how best to do that,” explains Jon Paquette, Head of Customer Success US at TIS. “And those projects are typically very reliant on internal IT resources.”
This disparate approach can result in numerous challenges for companies, not least of all because it can be difficult to adopt consistent controls in order to minimize fraud and other risks. In addition, valuable data tends to be trapped within silos, making it hard for companies to access it for analytical purposes.
A new way to optimize payments
Recently launched by TIS, the Enterprise Payment Optimization (EPO) platform supports a streamlined orchestration level – the EPO layer - designed to help companies manage their payments more effectively. As Paquette explains, EPO can be looked at in two different ways. “First, it’s a set of tools that gives you everything you need to break down those historical silos,” he says. “So, it’s a flexible way to connect to banks, with out-of-the-box bank connectivity, format translation capabilities and API capabilities. It’s also a way of leveraging and sharing data freely throughout your environment to different applications.”
In addition, says Paquette, EPO can be understood as an optimized state that enables companies to think about payments more strategically. “Through an EPO process, you have full access to the data you need for decision-making,” he says. “You can analyse your banking relationships and supplier relationships, making sure you are executing payments in an optimized way.” As a further benefit, companies can achieve more flexibility in their payments, making it easier to address any additional connectivity needs that may arise in the future.
Improving access to data
Where data is concerned, Paquette says that companies are increasingly looking to gain more real-time visibility over their cash. “Bank data is typically reported at the batch level, so it’s not that useful for analysing things from a transaction level standpoint,” he says. “And because of these siloed processes, access to data can be very region-specific, system-specific or bank-specific.”
By making payments data more accessible, as well as facilitating different means of viewing or receiving it eg dashboards, EPO enables companies to leverage data on their own terms. Clients can use information more strategically – whether that means creating better cash flow projections, analysing supplier trends or finding out whether there are better and more cost effective payment methods.
Paquette also points out that new technologies such as AI, predictive analytics and pattern recognition all rely on data – “and the solutions are only as good as the data they can leverage.” As such, breaking down siloed processes is a critical first step when it comes to leveraging additional capabilities, whether that means taking advantage of pattern recognition to mitigate the risk of fraud, or harnessing historical payment data to project future cash flow trends. In addition, by working with TIS, clients have access to years of multi-tenant data on the EPO platform which provides additional risk protection.
Every organization is at a different stage of maturity, says Paquette, however, it is important for all enterprises to effectively connect, collaborate, analyse, and improve in order to optimize the outbound payments process. “Essentially what we do is map clients’ processes using what we call the EPO Maturity Model,” he says, adding that the model includes four key stages:
TIS’ approach is to look at a client’s payment processes individually and map each of them to one of the four stages. This provides an opportunity to explore the shortcomings of specific processes or gaps, as well as explain the disadvantages companies may face by not progressing to the next stage.
“This tends to be a big eye-opener for most organizations,” says Paquette. “For one thing, a lot of companies don’t have full mapping of their payment processes or understand the current inefficiencies.” Once companies understand the framework, says Paquette, they are better placed to analyze and scrutinize the relevant processes and pinpoint ways to adopt best practices.
An EPO project isn’t a one-off exercise, and continuous improvement is also an important aspect of payments optimization. Acquisitions, divestitures, ERP migration projects and new bank relationships can all add complexity to a company’s payment environment, meaning that flexibility is essential. “It’s never a static process – so if you don’t have a technology solution that’s really flexible, you could quickly fall back into processes that aren’t optimized,” Paquette warns.
Likewise, as the banking landscape continues to evolve, developments like APIs and instant payments are providing new ways for companies to interact with their banks. “The EPO platform allows them to tap into these developments by providing capabilities that companies can leverage,” says Paquette.
In summary, Paquette says EPO is a tool that can help treasurers and finance teams guide companies into a more proactive position where they will be better placed to harness best practices in payments. “Organizations have focused a lot of attention on optimizing incoming cash flows, reducing DSO and getting cash in the door as quickly as possible – but have not paid the same amount of attention to optimizing their payments processes,” he concludes. “So, an EPO strategy provides significant opportunities to take control of payment processes, and to optimize those processes on a continuous basis.”