I was sitting having lunch in a café recently when I overheard two people at the next table talking about the fact that their pay had been a day late. For one man, he had to borrow money from family, while the other remarked that at least he was lucky to be able to do that – she knew of someone who was going to be late on their rent payment as a result. According to them, the blame lay at the feet of the bank – there’d been some sort of technical error. But it made me think if companies really understand the impact of these situations where payments are late.
The result of money worries
Ernst & Young recently found that 78% of people live paycheck to paycheck. It might seem like no big deal to some if someone has to wait an extra 24 or 48 hours for that payment to come through to their bank account. With that amount of people holding out for pay day, we know the reality is very different, and employees are counting on their money to reach their bank account when they expect it to for multiple reasons. Your employees have direct debits set up for rent, mortgages, or car payments and are dependent on having funds available.
Continuous late payments on something like that due to funds not hitting their account on time can have huge repercussions and even impact their credit score. While it may seem small, others might be waiting on that money to come through to finally get something around the house fixed or pay for that gift they’ve been meaning to pick up for an upcoming birthday. From the big worries to the small ones, it all adds unnecessary stress on employees when situations of late payments arise.
With PwC reporting that 54% of people say financial or money challenges cause them the most stress, the need for a managed payment system that can ensure a payroll that is accurate and on time is all the more evident.
Assessing the need for a managed payments solution
To ensure you’re not missing the mark, there are several payment options available, and one of these is availing of a simplified payment system. With this option, your provider takes on the full responsibility of moving your money to ensure employees, as well as statutory and third party payments, are made. Of course, there are other options out there, so knowing what works for you and your business is critical. In assessing your need for a managed payments solution, take a look at the following areas:
1. Review payments accuracy and timeliness
Starting with the obvious, this is vital to ensuring the right amount of money reaches recipients’ bank accounts when they expect it. If there are constant issues in achieving accurate and on time payroll payments, it’s time to look at why this is happening and if you’ve outgrown your current treasury management processes. Employees feel the knock-on effects of this, but they also have a huge impact on the business overall.
From a cost and time perspective, consider the implications of incorrect funds being issued. Underpayments cause the headache of dealing with complaints and time spent re-issuing and rectifying those payments. On the opposite side of the coin, overpayments can be hard to catch, often go unnoticed, and are never recouped.
2. Consider the number of parties involved in payment processing and funding
The more parties and individuals that touch payments and funding activity, the greater the risk. The information available to those in that process is extremely sensitive when you consider the nature of that data which includes things like salary and personal/business bank account details. Take the time to look at the number of internal and external parties that touch that data and how information is shared between all touchpoints.
The risk of data breaches and fraud rises exponentially if any manual effort is required to maintain and share this information. Utilizing a managed payments solution removes this risk as your provider manages the end-to-end process once the payroll is approved.
3. Look at the time internal teams spend on dealing with payment-related activity
Businesses are continually looking at ways to optimize operations across the organization. Treasury and payment processing should be no different. There are numerous things to consider that add to the time and manual effort required by your teams to ensure payments are made. To begin, ensuring pay-related information is in the required format for relevant banks is labor-intensive – local bank requirements need to be adhered to, and can vary from country to country, adding to the complexity.
In addition, approval processes should be looked at to consider who’s involved and what the typical turnaround time for authorization is. Once approved, time will need to be spent working through bank file uploads and addressing any potential upload issues. If teams are experiencing payments issues, they’re most likely going to have to spend time dealing with re-issuing payments.
The list goes on. All this equates to time spent on an extensive list of manual activities rather than working on value-add goals and hugely increases the risk of errors, inaccuracies, and late payments. A managed payments system can completely transform and streamline this process for the better.
4. Evaluate ease of access to payments information
Less than optimized treasury management processes rely on different systems, multiple parties, different authorization levels, and inconsistent reporting. Add to this the fact that failed or rejected payments are often handled outside of payroll systems; businesses will have no audit trail or visibility of payment and funding-related activity.
As the saying goes, if you can’t measure it, you can’t manage it. This is certainly the case without a centralized payroll solution that tracks payments processing. By working with a provider that manages end-to-end treasury management, companies can gain complete oversight of the process and have audit trails available at the touch of a button.
During the next evaluation of your global payroll and payments processes, take the time to look closely at each of these areas and the effect on both employees and the business.
If you’d like to learn more about how Immedis can support your global treasury requirements, get in touch here.