A guide to payment management software for 2022
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How long has it been since you signed a check? According to Forbes, paper checks accounted for 42% of B2B transactions in 2019. B2B payment management software has come a long way in a short time, especially with the rise of remote work since the 2020 lockdowns.
Even so, some companies still rely on manual procedures to pay bills. But between typing out information and waiting on approvals, the process is still cumbersome. This comes with a number of challenges, including missed payments, payment delays, fraud risk and errors.
Not to mention the time and money spent on processing.
In this article, we’ll explain how to take full advantage of payment management to streamline your process and reduce costs. We’ll cover what payment management software is, how it works, and how it can benefit your business.
What is payment management software?
Payment management software is any software that helps a company digitize B2B transactions. This includes everything from making and receiving payments to recording these payments for tax purposes.
What makes payment management solutions so powerful isn’t that they bring transactions online, but that they introduce the possibility of automation.
It’s hard to automate internally approving, signing and sending a paper check. Without a physical component, there is the potential to make processes almost instant. For that to happen, you have to choose the right software—and optimize its features.
Because spend management mistakes are avoidable and significantly impact profit margins, this article will focus on automating accounts payable processes and insights.
What is AP automation and how does it work?
Accounts payable (AP) automation is using payment management solutions to streamline your AP workflow.
Your accounts payable is a record of your unpaid bills. If you hire a contractor and they invoice you, that invoice remains on your accounts payable until it is paid. If your business is just getting started or you’re a solopreneur, the AP process may look pretty simple. You receive an invoice, you look at it, then pay it.
But as your company grows and begins to receive more and more bills and invoices, the process becomes increasingly complex. More gray areas begin to pop up, especially if you don’t have a set process.
- Who receives the invoice?
- Who needs to approve the invoice?
- How will the person approving the invoice know the details are correct?
- How will the person approving the invoice know the price is fair?
- Who pays the invoice?
- How will the invoice be paid (ACH, credit card, paper check etc)?
- What happens if two people pay the same invoice?
Answering these questions is frustrating even on a small scale. Imagine when there are dozens (if not hundreds) of invoices floating around.
The more your team grows and the more vendors you work with, the more that spend control becomes crucial to maintaining sustainable margins. You want to be sure that you’re not overpaying for services, duplicating spend or paying for incomplete services.
That’s when automating your AP process with payment management becomes foundational in saving time and money.
How does payment management software work?
Payment management software does administrative tasks related to paying bills and invoices. This includes receiving the invoice, entering data into accounting software, paying the invoice and closing the books.
Depending on the software, it may also include following up for payment details, categorizing spend details and catching potential mistakes.
The most advanced solutions require minimal oversight. Human touch points mainly involve a “yes” or a “no” for approval. Beyond this, the software is a tool that can be used to gain insight on spending.
Payment management software benefits
The main benefit of payment management software is that it prevents human error. A typical bill pay process requires at least five steps (if all goes smoothly).
Software doesn’t need to be reminded to do a task. In fact, it does the reminding for you. As soon as you input the invoice into the software, steps 1-5 are done automatically. If the software needs your input, it will notify you.
This lets you get to the last step, closing your books, faster and with less effort.
4 essential features of payment management software
Every payment management software should meet minimum requirements for digitizing payments.
This includes the following:
- A way to document invoice details such as the date, product or service, and price.
- A payment processor to pay bills and invoices.
- A transaction monitoring feature that updates in real-time.
- A reporting feature that gives you an overview of transactions at an individual, monthly and annual level.
While these are the basic features that any payment management software should have, we will cover other qualities to look for in the next section.
How to choose a payment management software
Choosing a payment management software can be daunting. You need a solution that can meet your business where it’s at, while allowing room for growth.
The right software will not only grow with you, but also support your business goals. Here are the qualities you should consider when making your decision.
Automations unlock business growth by saving you time and money when processing your accounts payable. Look for software that does the most tedious tasks for you.
Ask yourself: What administrative tasks do you want to offload? How much time could you save if you didn’t have to worry about those tasks?
Contractors and vendors accept different forms of payment. To truly automate your AP process, it’s important that the software you choose offers the payments they prefer. This could include ACH (bank deposits), credit card payments or even automated paper checks.
Ask yourself: Which contractors and vendors do you work with regularly? How do they prefer to be paid?
Getting your bills paid is only one half of the equation. You also want to be sure that you’re all set for tax season and audits by having all of your historical data in one place.
Ask yourself: What accounting software do you use? What information needs to be recorded? Does the payment management software integrate with my accounting platform?
Security is a concern for any online transaction. All credible payment management softwares will keep your security top-of-mind. You can also look for innovative secure solutions, such as virtual credit cards.
Ask yourself: What makes you feel secure with your payments? How does your payment management software keep your information and transactions secure?
A solution that supports your growth will not only save you time, but actively seek ways to save your business money. This can come in the form of dashboards that help you visualize your spending. Even more powerful are expert or AI-powered insights that catch opportunities for you.
Ask yourself: What information would help your business save money?
3 ways to better manage your payments
Payment management software is a tool. Just like any tool, its efficiency depends on how you use it. Here are 3 ways to use software to optimize your payment management:
- Create an operating budget: Knowing how much you spend is good, but contextualizing it is better. Without an operating budget, it’s difficult to understand whether you’re overspending, underspending or right on track.
- If you’re daunted by the idea of creating a budget, start with reviewing your previous spending. This is the first step to activity-based budgeting, a budgeting approach that helps you create realistic expectations based on how your company already operates.
- Set up your automations ASAP: The most powerful features won’t help if you don’t use them. Setting up automations takes time upfront, but leads to faster AP processing and fewer headaches overall. Getting everything set up early is a weight off your shoulders.
- Commit to regular audits. Automating your payments frees up time for strategic thinking. Auditing the reports that your software generates will give you insight into how to improve and grow your business. Commit to looking at your spending data at regular intervals.
Ramp: the top payment management software in 2022
Ramp makes innovative payment solutions accessible to small and medium-sized companies. Features that used to be reserved for enterprise level companies can now support your business growth.
Automate the approval process
Automatic spend controls allow you to stay on budget without monitoring every single transaction. You can set up vendor-specific cards, prevent unexpected charges for large items, and approve exceptions with a click of a button.
Save yourself and your team time by having a centralized location to request and approve transactions. No more rogue emails or Slack messages.
Get AI-powered insights
With so much going on in your business, looking for savings opportunities might be the last thing on your mind. Ramp takes care of the minutiae for you. Our AI-powered system will flag wasteful spending, duplicated purchases and contracts that are over market price. Plus, our experts are here to negotiate contracts for you.
Curb tail spend
Tail spend refers to small transactions that add up to large amounts because of frequency. While a cup of coffee or a few extra dollars on an invoice doesn’t seem like much, tail spend management can save your business up to 20% in total spend.
Ready to grow with Ramp? Sign up for free.
Payment management software bring B2B transactions online by providing a portal for everything from making and receiving payments to recording payments for tax purposes.
This depends on whether it is automated or manual. The steps include receiving a bill or invoice, checking for accuracy, getting approval, making a payment and recording the payment. Automating consolidates many of these steps into one.
The main benefit is that it reduces human error and oversight, which saves time and money.
Consider automations, payment options, accounting integrations, security and savings insights.