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May 12, 2015 | Authored by: Vindicia Team

The magic of automated payments

Ensuring cash flow ranks highly on the list of priorities for most companies. However, subscription-based enterprises may place even greater importance on it than most because the business model is largely centered on making sure consumers pay for their products or services on a recurring basis.

Subscriptions are a great way to keep revenue streams flowing, and automated payments play a major role in this framework. They help companies remain confident that a certain number of monthly or yearly transactions will occur as planned. However, automated payments require organizations to not only change their mindset but also their operational capabilities. And the latter point is one of the main obstacles that companies have to overcome.

Accounts payable throws a wrench in the operation

According to a recent article for Payments Week citing data from Tipalti and Gatepoint Research, 72 percent of companies said their accounts payable departments spend in excess of five hours per week handling the organizations' cash flows. The report also found that nearly every organization accepts wire transfers to process payments and still a full 88 percent use paper checks, while another 8 in 10 support ACH payments. The issue doesn't appear to be the multiple ways that companies are able to accept money for services rendered or products delivered, but the fact that it takes a long time to do it.

"Sixty-one percent of Americans have at least one automated payment set up to pay bills."

The companies in the study come from a wide variety of industries, but they're all tied together in the sheer volume of payments they process each month. PYMNTS.com wrote that 82 percent carry out more than 100 transactions on a monthly basis, and roughly 50 percent process more than 500 payments during the same time frame. There aren't too many signs indicating that the number of payments will lessen anytime soon, so it's up to business owners to consider new ways of safely, quickly and conveniently accepting payment for their services or products.

Manual processes may pose the greatest risk

Startups and businesses that are just beginning to acquire new customers may be able to get away with manual payment processing for a limited time. However, the goal for almost every commercial enterprise is growth in some context. That's why automated payments can have such a dramatic impact on a company looking to scale up or expands into new markets. In either case, there will inevitably be a need to process a higher volume of payments, and the expectation is this will happen a rapid speed.

Automated payments, as suggested in an article for Daily Finance, is logical choice for both a business and consumers. The customer can avoid multiple annoyances: late fees, leafing through stacks of bills to find the pay-by date and sending out multiple envelopes with either handwritten credit card information or a check.

Furthermore, the subscription-based service, such as over-the-top media, will continue streaming to the consumer's device of choice without interruption. In fact, 61 percent of Americans have at least one automated payment set up to pay bills, Eric Leiserson, a senior research analyst for financial technology services company Fiserv, told Daily Finance. So if a streaming video on demand service provider wants to make sure its customers make payments on time for their subscription, it's likely an automated payment option will serve both the company and consumer well.

Ensuring cash flow and managing payments without a lot of time and effort is a major component for companies looking to grow. Subscription-based payment models are highly effective in attracting loyal customers, but automated payments can strengthen the relationship even further. It's always important to listen to customer preferences and respond with the options that will suit them best.

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Vindicia Team

Vindicia Team

We value our subject matter experts and the insights each of them brings to the table. We want to encourage more thought leaders to come together and share their industry knowledge through our blog. Think you have something interesting to contribute as a guest blogger? Contact us at info@vindicia.com