When we think about payments, we often focus on the act of moving money—whether it's ACH, a check, or a credit card transaction. But in reality, payments don’t start as payments. They originate from obligations or processes deeply tied to a business’s financial operations. This distinction is critical to understand why optimizing the processes behind payments is just as important as managing the payments themselves.
Payments Start with Obligations and Processes
In the world of B2B transactions, payments are the result of obligations—rent, taxes, payroll—or processes like Accounts Payable (AP) and Accounts Receivable (AR). Control over payments, and the cash flow they represent, begins long before money changes hands. It starts with managing the upstream processes that drive payment initiation.
Accounts Payable: The Core of Payment Control
Take Accounts Payable as an example. This critical financial operation involves:
- Receiving invoices from suppliers.
- Extracting key data like supplier name, terms, and line items.
- Assigning accounting categories to expenses (e.g., classifying a PR agency's invoice as a "Marketing Expense").
- Gaining approvals to ensure legitimacy of the invoice.
- Recording the invoice as a liability in the ERP or accounting system.
These steps are where most of the pain and inefficiency occur. Processing a single invoice can cost a business $15–$20 even before the payment is made. AP automation solutions address this by introducing efficiency and control, allowing businesses to streamline the process and gain control over downstream payments.
Accounts Receivable: A Mirror Image
On the flip side, Accounts Receivable presents similar challenges. The process begins with presenting invoices, managing collections, resolving disputes, and establishing payment terms. While payment acceptance—via ACH, lockbox, or merchant services—is important, it represents only a fraction of the AR workflow. Here, too, automation brings efficiency, enabling businesses to manage their receivables more effectively and improve cash flow predictability.
The Shift Toward Financial Operations Solutions
The industry is moving toward solutions that focus on the full scope of financial operations rather than just the payment execution itself. These "Office of the CFO" solutions emphasize process efficiency, giving finance teams the tools to manage the obligations and workflows that lead to payments. By taking a process-first approach, businesses gain not only operational efficiency but also greater control over how and when payments are made.
Final Thoughts: Where Does Your Focus Lie?
If payments are simply the outcome of upstream processes, where should your priorities be? Are you investing enough in optimizing the workflows that lead to payments, or are you focused only on the final step?
The future of financial operations belongs to those who look beyond transactions and take control of the processes behind them. How will your business adapt?
