A process improvement consultant recently asked me if there was a way to truly automate the payment process so that a vendor could be paid using a procedure that is "untouched by human hands." As in many finance applications today, the answer is yes, with one important caveat: You can't buy it; you have to build it. While the tools exist, straight through processing (STP)–a concept that came into vogue toward the end of the last century–can only really be achieved by an enterprising treasury willing to commit the resources and know-how (forgive me, Don Henley of the Eagles) to "Build… the Perfect Beast."
Moving toward STP, the first hurdle for any treasury is accommodating its customers' various accounting systems. This has become much more scalable, thanks to the evolution of enterprise resource planning (ERP) and other commercially available accounting systems over the past several years. Now, most possess the capability to create electronic data interchange (EDI) payment advices and the means to generate Automated Clearing House (ACH) files that can be sent to the customer's bank for processing.
With the consolidation of the banking system, many more banks also have become EDI capable, offering "integrated payables" products that accept an EDI file and translate the messages into ACH, wire transfer and/or check payments. Some of these ACH payments can even include remittance information for transmission into the vendor's A/R system, if bank and vendor systems permit.
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One key step toward the ultimate STP–and one that is too often overlooked–is the eventual recording of payments into the general ledger. For this, the cash management team in treasury could turn to the latest in Web-based tools incorporated in the new generation of treasury workstations. The software would receive its information via the Web and automatically translate the data into accounting entries.
The above scenario ties together the payment approval process, transmission through the ERP into the banking system and finally, the recording of transactions into the general ledger with nearly "goof-proof" processing through the workstation. It also offers the promise of a more Sarbanes-Oxley-friendly system with audit trails.
The problem: No vendor or alliance of vendors has stepped forward to build this nirvana. That job has been left to ambitious treasuries.
In fact, the treasury management landscape appears void of providers offering solutions that address the big picture. Instead, you get ERP vendors focused on selling individual applications within their suite of products; banks that see integrated payables as a nice extra they can offer rather than a core product; and workstation providers noticeably silent in promoting a new vision of payment processing.
Instead, we are shown countless demos extolling the sexier side of the product line such as derivatives and foreign exchange trading. In my mind, these are all missed opportunities driven by vendors convinced that treasury and finance departments are still a bit gun-shy of large-scale implementations.
In summary, there is a great opportunity here to develop a new payment process to meet the realities of the new regulatory environment. However, there has been no individual vendor or consortium of vendors willing to take the lead in developing it and then attempt to sell it. Although in the current environment there are challenges for those who would sell the big system, the provider who brings these tools together to build the perfect beast in payment processing could have a competitive advantage for many years to come.
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