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Turn a Profit and Reduce Your Risk

Business owners need to constantly explore opportunities to save money and reduce risk


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It’s no secret that Denver is experiencing an abundant amount of growth. The state of Colorado was ranked 8th by Forbes on the Best States for Business list in 2018. This is good news for businesses, especially those that have the capacity and appetite for expansion.

Keeping these businesses successful and profitable is no easy task. Business owners need to constantly explore opportunities to save money and reduce risk, which is why evaluating payables and card operations are a good place to start optimizing operations.

For many businesses, an automated payables system can streamline internal process and consolidate expenditures into a single file. Automated payables can accommodate payments from automated clearing houses (ACHs), wire transfers and virtual cards without requiring changes to existing accounts payable processes.

A streamlined payables system could be very advantageous for a business, particularly one that’s just starting out. However, payables systems are complex, and there are a lot of components involved with getting a program to work for your business. Below are three questions to ask before determining which payables solution is best for your growing business.

WHAT IS PAYABLE AUTOMATION + WHY SHOULD MY BUSINESS IMPLEMENT IT?

Payable automation is another way for a company to pay a vendor’s invoice. A payables strategy can flag vendors in the company’s accounting software that are set up to receive card payment and will generate a payment file when invoices are sent to be paid.

There is a tremendous amount of soft costs that go into running vendor payments each week, but a payment file can help reduce these costs. First, the file can offer streamlined information including vendor name, total dollar amount to be paid and invoice reference numbers. Next, the file goes to a processor such as VISA to have emails sent automatically to vendors with instructions for them about how to receive their payments. Every day, the company will receive an email to inform them which vendors have accepted payment.

Payable automation saves money and is more efficient for companies. Instead of waiting for vendors to receive payments on a check schedule and fund availability of a financial institution, the process is in-house and therefore streamlined. In addition, the automation saves on check stock cost, reduces the risk of fraud attempts and cuts down on other fraud prevention service fees.

WHAT ARE GHOST CARDS + HOW CAN MY BUSINESS BENEFIT FROM THEIR USE? 

A ghost card is essentially a virtual credit card. Users have a card number, expiration date and CVV code they can use to make purchases online, but a physical plastic card is never issued.

Ghost cards are managed just like traditional cards but with some extra benefits. Typically, they have a larger credit limit as fraud risk is drastically decreased, because there’s no plastic card being used in public. 

Ghost cards usually are not titled in a specific person’s name, but rather a department’s name or generic name to easily distinguish how the card is being used. For example, a company could have a human resources card, an accounts payable card or a utilities card.

Ghost cards are a convenient way to have recurring payments like phone, Internet or janitorial services charged monthly to decrease check run time and accounts payable processing. 

Another way to use a ghost card effectively is for one-time payments to vendors. Instead of entering bills into the accounts payable system for check processing, ghost card users can place the payment on the card. This will eliminate data entry time for the vendors that are not used on a regular basis, in turn saving the company time and resources.  

IS IT BENEFICIAL TO PAY BY CARD?

There are several upsides to a business paying a vendor by card. One of the most significant benefits is that a business owner can take advantage of the up to 55-day cash float that they won’t get when they pay by check or ACH. When a card is used, the vendor still receives their funds immediately, but the money doesn’t come out of the business’ account until payment is due. This allows the business to keep more funds in the bank, where the money can earn interest or help the business pay off a loan.

Companies should always be looking for ways to make processes less costly and more efficient. By leveraging payment automation, companies are often able to reduce fraud and overhead. In addition, companies can take advantage of incentives such as rebate programs and discounted vendor pricing, and can also receive detailed reporting on payment and remittance.

Business owners should consider talking with a local banker about how best to manage the company’s payables. Setting up an efficient payable system can go a long way in helping make the company profitable and sustainable.


Eric Craine is the sales director for commercial card and treasury management, can be reached at eric.craine@umb.com.

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Eric Craine
Eric Craine, Senior Vice President and Regional Sales Manager for UMB Bank's Treasury Solutions West Region, has more than 15 years of experience in banking. Contact Eric by calling 303.839.2222 or emailing eric.craine@umb.com

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