Does Automating Payments Offer Protection Against Late Fees?
Many consumers set up automatic payments to pay credit card bills, utility bills and other recurring charges. They can be convenient, but they can also leave room for error that could lead to fees if the payment doesn’t come through as expected.
Fortunately, you can avoid some of the problems that can occur with automatic payments by taking several precautions.
Reduced costs
One of the biggest benefits of automating payments is that it eliminates the need to send paper invoices and documentation to clients. This reduces business costs and environmental impact by reducing the use of materials. It also means that payments can be made more quickly, which can lead to fewer late fees for businesses.
Another cost-saving advantage of payment automation is that it offers a higher level of security and protection against fraud than traditional paper transactions. Those committing fraud often target checks because they’re easier to forge, but automated billing software offers strong protection against unauthorized access to sensitive financial information.
Finally, payment automation allows for greater visibility into accounts payable processes. This can help finance executives better understand, predict, and forecast cash flows. It also helps them identify opportunities for strategic tools that optimize working capital, such as supply chain financing and dynamic discounting.
Moreover, it can improve supplier relationships because AP typically spends a lot of time responding to questions about invoice and payment statuses. With automation, however, companies can provide suppliers with real-time 24/7 transparency into their transactions via a digital portal, reducing the workload and improving relations. The shortening of payment cycles can also help to decrease days sales outstanding, further enhancing supplier satisfaction. This is especially important for small-to-midsized enterprises that rely on a diverse range of suppliers to grow and scale their operations.
Improved customer service
Using payment automation, it is much easier to communicate with customers and provide them with an exceptional level of service. For instance, it is possible to verify that payment information (like the recipient’s name, bank account number, or routing number) is accurate before a transaction is processed. This can help prevent errors that can lead to payments being sent to the wrong people.
This type of automation can also reduce the amount of time it takes to process invoice payments. Manual processes can sometimes take up to 25 days to complete, but automate payments processes are typically much faster. This can save businesses valuable time that they can use to focus on other priorities.
Additionally, payment automation can help improve customer service by reducing the likelihood of late fees and other costly mistakes. For example, steep late fees aren’t always enough of a deterrent to encourage consumers to pay on time. Instead, 2022 ABA-commissioned research found that increased notifications and credit score monitoring were better deterrents to late payments than high fees.
Finally, payment automation can also reduce payment fraud by ensuring that only invoice payments that match corresponding purchase orders are approved and paid. It can also ensure compliance with regulations such as the Payment Card Industry Data Security Standard, General Data Protection Regulation, and anti-money laundering legislation.
Reduced late fees
Overdue payments in the accounts payable department are a real pain point for many firms, and they can lead to costly penalties and even damaged supplier relationships. Fortunately, there are ways to reduce the number of overdue payments that happen in your firm, and payment automation is one way to do it.
Automating payments, such as ACH transfers, virtual card payments, and checks, eliminates the risk of human error and creates a more streamlined process for invoice approval and payment processing. It also helps you better understand and manage cash flow and working capital.
Another benefit of payment automation is that it often results in fewer payment delays. Manual processes often get bogged down in paper work, lost checks, and errors that can cause a delay in payments. In contrast, automated payments are more efficient and can help you improve your “on-time” payment record with suppliers.
Additionally, if you use a solution like RECUR360 to automate your payments, it is easy to set up late fees and send out an email to customers when an invoice goes past due. You can choose whether to charge a flat fee or a percentage of the total amount owed, depending on your business needs and agreements with customers. You can also adjust the time frame of the late fee, as well as how the email is worded to best fit your needs.
Greater flexibility
Many people use automatic payments to pay recurring bills, including utility bills, credit card debt, gym fees, auto loans and car payments, childcare expenses, monthly subscriptions, and more. These can help make sure that bills are paid on time, and some companies even offer a discount or reduced interest rate on loan repayments when customers choose to pay through an automated bank transfer.
However, there are a few things to consider about these types of automatic payments. For one, they can cause problems if you miss a payment or don’t have enough money in your checking account to cover the automatic deduction. Moreover, it can be difficult to cancel these payments if you change your mind or decide that the service is no longer necessary.
Another issue is that it can take days to process a paper check or an invoice. And if your team is working remotely, it can be difficult to keep track of all the payments coming in as they arrive.
Using a digital payment platform allows your team to accept or decline invoice payments from any device, as approvers can work from the office or on the go. Plus, you can ensure that all payments are being made by verifying the payment information at the time of acceptance. This helps to prevent errors that can lead to unallocated cash and strained supplier relationships.