What is Payment Management Software?

An effective payment management system in an enterprise solves several problems simultaneously. Minimizes the likelihood of cash gaps and ensures timely payment management software accounts payable. Improves the quality of money management and decreases the need for borrowed funds. Strengthens internal management in the area of settlements. What it consists of and how to make perfect management payment by software, we tell you in this article.

What is Included in Payment Management Software?

This is an internal enterprise mechanism with its own structure and regulations. It helps to formalize the process of money flow and offer solutions to answer questions like:

• How many invoices are there and how much is to be paid today;
• What to do if some required software for the payments system exceeds the limits fixed in the cash flow budget (BCBS);
• Whether to payment a vendor’s bill if there is not yet a final contract with the vendor;
• Which payment system order will be rejected and who has the right to do so, etc.

Figuratively speaking, the payment management system (PMS) is a path that connects two points: (1) the need to make software for payment to the counterparty and (2) transfer money to him. It seems that it is not difficult. We receive an invoice from the supplier and there is just one solution — we pay it. But it can be so only in an ideal world where ideal software exists. In reality, the process is complicated by the following points:

• There is not enough money for payment of all the obligations, and you have to choose who you want to get payment first;
• The purchase is not really necessary to ensure a smooth operation software of the company, and it is possible to do without it;
• Due to the inattention of employees and/or inefficient management of document flow, some invoices are missed, some are paid twice, etc.

In order to minimize such problems, the system in question is required.

How Does Payment Management Software Work?

First, let us understand what it consists of. These are people and documents. Let’s consider each component in order. We’ll begin with the second so that when describing the functionality of the people in charge, we can use familiar terms.

The list of documents that are created within the CMS, as well as to ensure its operation, we have given in the scheme. They are divided into four groups:

• payment system initiation;
• payment itself;
• planning and management of cash flows by software;
• regulating online payment management system operations with the right

Note: any management has some of these things on the chart. Even those where PMS is essentially absent and payments are made chaotically: without checking compliance with contracts, without management of the validity and completeness of transfers. Such mandatory documents include “primary documents” and accounting registers like account statements and cash books.

The first step in the solution of the creation of a PMS is the development of document forms, software and thinking through the procedure for filling out and handling them. Next, determine who is responsible. This step introduces the second component — the people.

Problems with online payment management systems

We have already noted above that the larger the company, the more employees are involved in the BMS. The longer the path of a payment software request from initiation to the moment of payment will be.

There are two ways to solve this problem.

First, automate the process by software as much as possible. If possible, use special software development rather than being satisfied with Excel spreadsheets. This could be, for example, such software as “1C: Holding Management” or “1C: Corporation”. What can you give to the software? For example:

• Build directories with codes and names of BDDS items, and centers of financial responsibility, and link the requests to contracts and/or invoices;
• Create the possibility of supplementing the request with primary documents — scanned copies or electronic versions in software;
• Ensure automatic software accumulation of amounts due from requests on an accrual basis for the period. Do this in the context of individual BDDS items. Requests that exceed the budget limit should be immediately blocked by the software. Then let them be sent to the CFO for review, bypassing other management;
• Make the tracking of the status and “whereabouts” of requests transparent for PMS participants.

Secondly, to initially simplify the mechanism by software for approving payments by singling out the part of them that does not require special management. For example, in one company, such transfers include the following:

• bank software for the current account;
• dividends to the founders;
• fines and penalties for failure to meet deadlines under supply contracts;
• expenditures on fuel and lubricants for the vehicles of freight forwarders;
• internal transfers.

The last point concerns payments:

• Either between individual management that are part of a group (system) of companies or between representative offices or branches of the same company.
• If department heads are accustomed to carrying bills for payment to the accounting department at any time, the introduction of restrictions on dates and hours may at first be ignored or even sabotaged.
• However, it is clear: there is no room for slackness. CPS regulations must be strictly adhered to by all participants in the process. Otherwise, they will be of no use, and the system will not work.

This is how things work in some companies:

1. Strictly adhere to the established time limits and accept, for payment for tomorrow, applications submitted before 15.00 hours. All the rest are considered for the next day. So they will accept payments for them one day later if there is money in the accounts;
2. One more solution — define one day in the week as a “clean” day. It is exempt from all settlement software deals. This allows the financial and economic specialists to focus on other processes: generating statements for the past week, resolving disputes with counterparties, etc. Exceptions apply only to those requests approved for payment by the CEO or CFO.

Sometimes the starting point in the system in question is a payment system request. In reality, this is not quite right. After all, then its basis is ignored — the contract or invoice from the supplier/contractor. For typical transactions, it is reasonable to omit the management points. And for non-typical software operations, introduce a procedure of step-by-step approval of contracts to be concluded.

Let’s share an example from real practice, where the process of preparing a non-template contract goes through the following steps:

• analysis of the need to conclude, which is carried out by the financial service;
• the coordination of a draft, which is prepared by software for management, with the manager’s immediate supervisor;
• verification of the project by the legal and accounting departments in terms of tax, currency, and other risks;
• management of correspondence of expenditures items from the budget of revenues and expenditures and cash outflows from BDS;
• final approval by the legal and financial directors;
• signing by the general director.

Obviously, the path to contracting is not a quick one. To ensure that the process is not unnecessarily delayed, each employee must work in the payment system: he has one business day for the contract management procedures.

• What should be done to improve the effectiveness of the CPS? To get the answer, gather feedback from the process participants. For example, software bugs, too long procedure for approving standard payment requests, or lack of information when forming the payment calendar are best described by those who are directly involved in this process;
• How do you know that the situation with settlements has improved after the implementation of the PMS? To do this, develop a system of evaluation criteria. Let’s look at them in more detail.

It is not enough to think through the forms of documents, assign people responsible for them, and fix it all with regulations. You need to make sure that the system works, understand its weaknesses and tighten them, as well as find a payment management solution. Go to Corefy`s site for that!