By Jessica Moran
Healthcare executives face tremendous pressure to provide quality care to patients, streamline registration experiences, and comply with data privacy regulations — all while being tasked with increasing operational efficiencies and decreasing costs. These pressures land heavily on Accounts Payable (AP) departments struggling to tie activity to the primary objectives of the organization. In fact, cost reduction initiatives are the number one priority of CFOs today, according to KaufmanHall1.
Why the focus on the AP function as an area for improvement? Many healthcare organizations have expansive supplier networks. Making on-time payments to vendors relies on cash flow that can be affected by factors outside the organization’s control, including federal reimbursement, patient payments, and regulatory issues. With these factors complicating the AP process and over 49% of healthcare organizations still making most of their payments through manual processes with paper checks2, it’s no wonder CFOs find themselves struggling to rein in the costs of making payments.
Paper-based payments are labor intensive and time consuming. Manual handling of invoices and checks is also prone to potential errors, late payments and exposure to fraud. In an industry that is focused on delivering exceptional patient care, examining ways to extend those high standards to supplier relationships is critical to achieving that level of care.
Fortunately, with the right payment processing improvements it is possible for healthcare organizations to transform AP into a streamlined, cost-effective function. These improvements include paying suppliers on time, eliminating unnecessary costs and non-value add staff activity, and meeting security requirements, all while generating rebates on AP spend. Yes, there is money to be saved with automation and a potential revenue stream that hospitals may be missing out on by relying solely on paper-based payments.
Transitioning to electronic payments with an integrated payables solution is a key step healthcare CFOs can take to meet and exceed cost reduction and efficiency goals. The benefits to replacing paper-based checks with automated payments are numerous and include:
- Reduced processing costs
- Strengthened supplier relationships
- Enhanced visibility into cash flow
- Built-in security and fraud protection
- Rebates on AP spend
Reduced Processing Costs
The manual handling of checks requires dedicated labor hours, data entry, routing for approval and document storage, not to mention the reams of paper, expensive printing supplies and postage necessary in a paper-based payables model.
Payment automation and electronic payments eliminate the need for these supplies, cutting the associated hard costs and reducing environmental impact.
Strengthened Supplier Relationships
Integrated payables solutions give healthcare organizations the flexibility to pay suppliers in their preferred format—whether virtual card, ACH, or check. Some of these payment methods aid in hospitals’ ability to take advantage of early-pay discounts and reduce the number of late payments.
It is important to choose an electronic payment solution that can provide suppliers with rich remittance detail, which makes cash application easier for their Accounts Receivable (AR) departments.
Enhanced Visibility into Cash Flow
A manual-based AP process doesn’t just encompass paper payment transactions, it also includes paper tracking documents and storage files – all of which makes it difficult and time-consuming to follow an audit trail or determine real-time status of a payment.
The right integrated payables solution will provide hospitals with improved reporting, auditing, and visibility to cash, which facilitates better decision-making across supplier relationships and spend management. This helps elevate the AP department as a strategic partner to the larger organization.
Built-in Security and Fraud Protection
Processing checks leaves organizations vulnerable to payment fraud. Automating payments can help reduce the incidence of fraud by as much as 10 times with electronic transactions3.
A sophisticated electronic payment partner will have built-in security monitoring technology to identify threats and stop unauthorized transfers of funds. Your partner should also verify and maintain sensitive bank information of suppliers and securely store the data in a location with multiple fail-safes in place.
Rebates on AP spend
Lastly, there’s the opportunity to earn cash back on AP spend depending on the payment structure in place. This can increase overall positive ROI and has the potential to transform the AP department from a cost center into a profit center.
When seeking an integrated payables provider it’s important for healthcare organizations to find a solution that offers multiple payment types, integrates into existing back office systems, as well as bank accounts, and offers a rebate model.
With these features in place, transitioning to an automated AP solution can help healthcare organizations increase efficiency, reduce costs, and mitigate fraud risk while also monetizing AP spend. Automating AP payments elevates the strategic relevance of the AP function and aligns it to the top priorities of healthcare organizations, including an interrupted supply chain for uninterrupted patient care.
- KaufmanHall, 2019 CFO Outlook: Performance Management Trends and Priorities in Healthcare
- Paystream Advisors, 2018 Payables Insight Report
- IOFM, 4-Steps to Bringing a Positive ROI to Accounts Payable 2018