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Treasury Challenges in the Changing Payments Environment

  • By Sandy Runyon, AAP, CCM
  • Published: 3/17/2016

Collecting funds from customers is critical for all companies. Some of the questions to consider when determining the impact collecting funds has on cash flow are:

  • Who is responsible for payment processing?
  • Are payments being collected and disbursed securely, efficiently and cost-effectively?
  • Are the payment methods used fitting into the payment puzzle?

pay11111Companies often have a department or group handling treasury functions that include accounts receivable and accounts payable. However, the role of treasury in larger companies has changed over time. Whereas the collection of payments used to be a primary treasury function in larger companies, this is no longer the case. Today, these companies have treasury take on a more strategic role such as managing banking relationships, investments and liquidity. The traditional role of collecting and disbursing of funds has moved from treasury to operational teams. Therefore, it is important for treasury to coordinate with these teams to understand the impacts payment processing can have on cash flow. Together these teams should be analyzing the payment systems and payment options offered to their customers.  

Payment systems are used to collect or disburse funds with the intent of maximizing cash flow. The goal for payment systems and the payment methods they offer is to assist in eliminating funds being mistimed, mismatched, irregular and unpredictable. Today, speed, efficiency, ubiquity and security are taking a front seat in the development of emerging and alternative payments. The Federal Reserve has taken an active role in this development, with the introduction of its Faster and Secure Payments Task Forces.

It is easy to assume payments are being processed without considering the methods being used. The question for treasurers is whether their companies are considering alternative payments that will increase cash flow and retain customers. While one might think there is no reason to change or offer alternative payment methods, this decision should be viewed in light of three Rs—reasons for new methods, risks associated with these methods, and the regulations governing them.  

  • Reasons: Part of this may deal with clientele. Businesses dealing with customers in a face-to-face environment have many options. While the saying “cash is king” is still used, it carries risks and costs associated with collecting and depositing funds. While checks are still used, processing timeframes and costs have been minimized. The key may be in meeting customer demands—speed, convenience, seamlessness and efficiency. Depending upon a company’s online presence and customer database, new and alternative payment methods should be considered.  
  • Risks: Security should always be a primary concern. Is payment risk being calculated and minimized? Fraud and the costs associated with it cannot be overlooked when assessing payment processing risks.
  • Regulations: All payment methods are governed by rules and regulations. It is important to know which rules apply as well as the compliance risks associated with not following them. If your company is using a payment processor, understand how your payments are being processed. Ask questions; do not assume answers. It is still your responsibility to ensure rules and regulations are followed.

From the check in the mail to payments traveling through the cloud, the payments environment is changing due to technology. This change is being driven by customers demanding faster, safer and ubiquitous payment alternatives. The question is, are the payment methods accepted affecting cash flow and clientele? Payments are part of the puzzle requiring companies to analyze the impact on their consumers and cash flow as payment method decisions are made.

Sandy Runyon, AAP, CCM is a corporate treasury consultant.

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