The payment cycle is often an overlooked aspect by many businesses that are looking to automate and streamline their operations. The process of managing the payments for your business can be tedious and time-consuming, but it doesn’t have to be.
What is Payment Cycle Management?
A payment cycle is a process of invoicing and collecting payments for your business. Invoices are generated, sent out to customers, then after a certain period of time past due (if not paid within that time frame), it’s followed by an attempt at collection or chargeback if necessary. The more extensive this process becomes, the longer it takes for you to receive the payment.
This process is usually managed by an Accounts Payable (AP) team. They oversee the billing of hundreds of invoices and compare their purchase orders, which can be an arduous and time-consuming task.
Digital workflows and machine learning simplify transactional and corporate processes in today’s digital world, making them more effective while removing people from the equation and eliminating the possibility of human error, and clearing more time for employees to work on other, more important tasks.
Definition of Payment Cycle Management
Payment cycle management is a financial process that allows businesses to identify, track, collect, and manage incoming payments for services rendered. The RCM process is critical to ensuring financial stability and providing outstanding service.
RCM may encourage citizen, patient, and student participation through establishing relationships that foster a stronger sense of community and dedication, in addition to just facilitating secure billing and payments.
Disadvantages of Manual Payment Cycle Management
According to an article from Forbes, if you don’t use automation on your billing, you are most likely spending $8 or more per invoice. This is due to several factors. The most obvious one is the fact that manual data entry consumes more time.
However, the dilemma doesn’t end there. Your AP team will then have to get approval and initiate payments after. Because everything is manual, this process can easily lead to potential errors, miscalculations, and incorrect charges.
Even small businesses might have hundreds or thousands of invoices each month – it’s clear to see how relying on a manual payment management cycle adds so much time, employee hours, and the risk of human error and blunders. So, the cost to businesses can be both financial and reputational.
Benefits of Automated Payment Cycle Management
Using an automated Payment Cycle Management to make invoicing faster, more accurate, and completely compliant is a straightforward method for increasing overall company efficiency and reliability, not to mention a vast savings generator.
By creating a more efficient and effective payment cycle management, you can easily track your finances going in and out. In addition, it gives you the capability to improve your business process by quickly identifying failures and opportunities.
Top companies use invoice process automation globally to maximize savings, reduce costs, improve customer experiences, increase productivity and efficiency, and assure company continuity during a business interruption. Here are just some of the ways switching to an automated payment cycle management system would benefit your business.
Boost Efficiency
On average, businesses spend too much time worrying about the payment cycle. Sometimes it even takes up a majority of an accounting team’s day to focus on the payments and ensuring that they are sent out properly or followed-up with if necessary.
This can be highly frustrating for employees who would rather spend their time focusing on more important tasks. An automated payment cycle management system ensures that your staff is more efficient and productive.
Drive Accuracy
Automated Payment Cycle Management eliminates human errors and slow data entry processes. This is made possible by the software’s ability to capture complete data from invoices while verifying and integrating it into your system.
Improved Supplier-Vendor Relationships
When your staff is too busy worrying about payments, it may lead to mistakes and inaccuracy. The more often an invoice gets sent out without the proper payment terms or incorrect information, the harder it becomes for you to collect that money and even worse if a chargeback occurs because of improper invoicing practices. An automated system would ensure that all invoices are sent out correctly and that the payment terms listed are accurate.
Improved Cash Flow Management
As part of a more comprehensive accounting automation approach, Automatic PCM provides finance teams with improved control over cash flow and budgets (including employee pay stubs) by improving end-to-end visibility and allowing expenditure commitments to be controlled more precisely against business rules.
Improved Employee Satisfaction
When staff members are too occupied with the mundane task of making payments, it can decrease morale and cause them to become disgruntled. This is because they’re not able to focus their time on other necessary processes that could be beneficial for your company or business. An automated payment cycle management system would allow employees from all levels within your company to focus on other important tasks and know that their hard work is valued and appreciated.
6 Payment Cycle Management Obstacles
While the four processes in the payment cycle management process appear to be basic, they are not. Challenges will surely develop, potentially wrecking financial and compliance havoc.
Here are six frequent payment cycle management difficulties, as well as their potential outcomes:
- Failure to adhere to (or even have) a financial policy. This can lead to problems with government, healthcare, higher education, financial, privacy, and security regulations. Management should always implement the most recent standards and ensure that they are strictly adhered to. Without this, your organization risks significant fines and a tarnished reputation.
- Glitch in technology. These are typical when numerous systems attempt to communicate with one another. Managing technology in the revenue cycle can be difficult, whether the most recent information isn’t in the right place at the appropriate time, or one system fails and affects the others. The result is wasted time correcting problems and an inability to pay their invoices, leaving you with a revenue shortfall.
- Inadequate staffing and/or training. Because of constant turnover and evolving procedures, managing change and keeping everyone up to date on current protocols is complex, time-consuming, and costly.
- Errors in entry. One of the most difficult issues in the revenue cycle is detecting and removing human entry errors. Furthermore, billing errors irritate payees and reduce consumer satisfaction.
- Payments are collected before and/or after services are given. This is a work that demands both perseverance and patience. Managing the balance of those two attributes and their corresponding methods is undoubtedly difficult. However, if it is not present, all revenue is lost.
- Reports that are missing or erroneous. This can have long-term managerial and budgetary consequences that affect every department. They make goals impossible to achieve and have the potential to ruin a company’s finances.
Who Is Affected by Payment Cycle Management?
Government, healthcare, and higher education are three main industries that benefit greatly from revenue cycle management, among many others. The solution is a one-stop, seamless, secure receipt-to-reconciliation payment and engagement platform that addresses all of the revenue cycle’s concerns.
Here are some instances of how such a platform might help businesses better manage the often complex and difficult revenue cycle:
- Constituents of local, state, and federal government agencies desire modern, convenient interactions, especially as municipalities evolve. Government agencies require revenue cycle management to simplify payments and increase inbound revenue collections, hence enhancing the overall welfare and pleasure of their constituents.
- As they make medical billing payments, patients require positive involvement and private conversations from healthcare professionals. Payment cycle management should be used by providers to ease payment collections and contribute to better patient and employee outcomes.
- Students at higher education institutions are progressive, expecting technologically enhanced payment solutions and a more connected campus. By recognizing and appealing to student and family requirements, institutions can use revenue cycle management to maximize inbound money.
Conclusion
The payment cycle is an essential aspect for any business to consider when automating its operations. Unfortunately, the management of this process can be tedious and time-consuming, but that’s not always the case. With many businesses now opting to automate their entire operations, it would make sense that they also look into automated payment cycle management systems, so you don’t have to worry about the process being too tedious for your staff members.
