The Need To Adapt To Ride Out The Storm

“If payment execution itself is manual, firms can expect disruption. If third parties use manual labor to execute payments, there will be disruption,” Tipalti CEO and Co-founder Chen Amit told PYMNTS. “To the extent possible, it’s best to use fully automated systems that minimize manual labor both in the company and in the provider’s back office.” Learn Tipalti’s approach in Black Swan, a PYMNTS special report.

The following is an excerpt from Black Swan, contributed by Tipalti CEO and Co-founder Chen Amit.

The Need To Adapt To Ride Out The Storm

The most significant challenge with black swan events is adapting to changes quickly. Many of these adaptations feel unnatural, but those who are better in adapting to the “new normal” will fare better. Given the uncertainty of how ever-changing situations may affect the world, it’s key to enable greater adaptability with business strategies and tools.

The most basic strategy is to maintain a strong cash position. This affords businesses with a foundation from which they can hold their ground. Ideally, an organization has built that up with smart finances during good times. It is important for a business to evaluate possible scenarios and make adjustments that will ensure long-term viability.

Investors will likely hunker down (as they did in the previous two black swan events), and firms will most likely need to be self-reliant.

Once that solvency is in place, the organization should evaluate what the “new normal” looks like. What adjustments do they need to make now that their teams work from home? What processes relied on physical human interaction that cannot occur as regularly now? If the team’s efficiency is expected to decline during the initial adjustment period, how can the business help through automation?

Finance is one of the areas that can benefit tremendously from automation. More than ever, CEOs, boards and investors will expect the office of the CFO to drive the business to do more with less, not only for their finance department but for the entire organization.

Whenever possible, businesses should de-centralize while ensuring control. They can let the suppliers onboard themselves, fill tax forms, enter payment data and respond to exceptions. It will save time, allow the supplier more control and minimize the opportunity for mistakes (after all, suppliers have the best knowledge of their own information).

If workflows are manual (regardless of whether the communication is digital or not), a firm can expect disruptions. If an organization relies on a person to summarize information and manage the collection of information and approvals, they can expect disruption. The better course of action is to rely on automated systems that can streamline the collection of information and approvals.

If payment execution itself is manual, firms can expect disruption. If third parties use manual labor to execute payments, there will be disruption. To the extent possible, it’s best to use fully automated systems that minimize manual labor both in the company and in the provider’s back office.

There is a reason that accounts payable (AP) is consistently identified as the single most time-consuming function of finance.

A growing number of FinTech solutions are now available to significantly reduce the manual effort required to manage the supplier payments operation. Banks are excellent at moving funds in a one-to-one model, but any scaled one-to-many operation is problematic. That often requires additional staff to handle AP and disbursements, most of which involve setting up and monitoring transfers (U.S. ACH, wire, local bank transfers/global ACH, PayPal, paper checks, etc.). It sounds simple, but ensuring that a supplier is payable and having their correct bank routing data can involve detective work and outbound communication skills, activities for which finance people are not well-suited.

In a shifting climate where unknown factors can affect cross-border payments and supply chains, the risk of payment failures and regulatory issues increases with manual intervention. It’s crucial to look into AP automation tools that fit a business’ payment needs.

Many still lose sight of the fact that AP automation is more than straight-through invoice processing. AP includes supplier onboarding and management, tax compliance, making payments in the U.S. as well as to and from numerous geographies, fraud and financial controls, PO matching and payment reconciliation. Solving for invoices is difficult, but it’s just as difficult to execute payments, and it takes just as much time to reconcile payment data back into ERPs. The most modern AP automation solutions provide a level of artificial intelligence (AI) that improves the adaptability required to address changing conditions at every step of the payables process.

The lesson from the past black swan events in 2001 and 2008, and now COVID-19, is to enable rapid and ongoing adaptation, recognize the “new normal” and be open to change.

Read more executives’ insights on the COVID-19 crisis in Black Swan.