New Payment Solutions for Accounting Firmsby
It may seem ironic that so many accounting firms have difficulty with their own account receivables, but it’s true nonetheless. As much as today’s accounting firms have an increasing number of digital tools to help them manage their clients’ finances, there's a surprisingly limited number of products available to help accountants seamlessly accept secure payment from these same clients.
Overdue receivables require extensive time and energy, may necessitate a potential line of credit to fund operations during times of non-payment and can negatively impact the overall client relationship.
Furthermore, clients often have a variety of ways they prefer to pay for their accounting expenses, making it challenging for firms to be consistent and efficient in their collections process. Before addressing possible solutions to these issues, it’s important to understand the challenges of existing processes.
The Limitations of Manual Processes
Despite rapid expansion of fintech solutions, too many accounting firms are still wasting time and money with manual accounts payable (AP) and paper checks, both of which are costly and inefficient. According to Goldman Sachs, U.S. businesses spend more than $500 billion each year in B2B payment costs, including personnel costs, payment processing fees, cross-border payment charges, late fees and inventory financing costs. This is further compounded by the fact that up to 80 percent of businesses still pay a majority of checks on paper.
In addition, every invoice paid with a manual process is estimated to cost a small business up to $22 in headcount and processing costs-- a figure that adds up quickly (and unnecessarily). The bottom line is that manual AP requires time and effort that could be better spent on more pressing business priorities and higher value client needs.
At some organizations, including nonprofits, two signatures are required for every check, slowing the process down even more. And let’s not forget that manual processes can easily lead to human errors, delays, missed payments and penalties.
As the digital payments landscape continues to grow, traditional paper checks and manual AP will become obsolete. While the shift may happen slowly, when it does finally happen, it’s critical that professional services firms and their clients are ready.
The Value of Digital Payment Solutions
There are distinct advantages of digital payments, including automation, cash flow management, built-in audit trails and collaboration. By expanding payment options today, firms will be much better positioned to increase productivity, grow revenue and provide improved client service, all while collecting fees cost-effectively and efficiently.
Providing clients with variable payment options provides them with the flexibility they expect, and frankly, demand. Especially during this time of COVID-19, digital solutions can help minimize personal contact from in-person payment and mitigate safety concerns for both clients and accounting professionals alike. In addition, digital solutions also provide accountants more time and opportunities to deliver strategic counsel for their clients.
Alternative payment solutions can help remove some of the friction from the payments process. The best way for accounting firms to determine which digital payment solution is the right fit for their needs is by learning more about each option and closely examining the needs and friction points of their individual practice. Here’s a look at some of the most popular options:
1. Automation. AP automation significantly lowers the back-and-forth of manual invoice processing, saving significant time and labor costs. Firms can eliminate costs (e.g., check stock, printer ink, envelopes and postage), while securing a more rapid and efficient process for a fraction of the cost. Companies with automated processes and digital payments are saving an estimated 76 percent on their direct AP costs. Gartner estimates that by implementing robotic process automation, an accounting team of 40 could save up to 25,000 hours of avoidable rework per year, freeing up time for higher value work such as analysis and forecasting while increasing engagement and reducing staff turnover.
2. Artificial Intelligence. AI and machine learning are helping to automate workflows that improve and expedite the overall AP process. Through data analysis, AI is identifying lower cost vendors, anticipating upcoming invoices and timing payments to maximize discounts and cash flow. Furthermore, employees who were spending extra time on tedious, manual tasks are now free to allocate their time to more complex or pressing needs.
3. Online Credit Card Payments. Accounting firms are increasingly moving away from paper checks and accepting credit card payments online. Many view credit cards as an opportunity to avoid the collections process and minimize the likelihood of delayed or missed payments. Importantly, credit card payments can help clients better manage their expenses, a critical concern during the pandemic.
4. Installment Payments. Professional services firms can also offer their clients the flexibility of monthly installment payments on their credit cards over a period of time that suits their cash flow. At the same time, firms can get paid faster, conveniently, at less cost and at low risk while still being able to deliver the essential advice and counsel clients are seeking.
It’s worth noting that accounting firms providing audit or attestation services are not able to issue a clean report if there are outstanding fees owed from the client to the firm for any services. In this instance, installment payments allow clients to pay up front and on time while firms can maintain the required independence to perform their auditory or attestation functions.
As digital payments technology continues to advance, the professional services firms that are ready to leverage the many opportunities that these solutions offer will be in a prime position to unlock maximum value. Gone are the days when accounting firms can afford to wait patiently for their clients to pay them for time and services rendered.
In today’s challenging economy, the firms that say goodbye to manual processes and paper checks and adopt more convenient and cost-effective digital solutions will be able to spend more time counting their fees instead of chasing them.