Sunday , July 14, 2024

COMMENTARY: Streamlining Payments with Straight-Through Processing

In today’s fast-paced business landscape, efficiency and quality are essential for staying ahead of the competition. Straight-through processing (STP) is a solution that enables businesses to expedite financial transaction processing while reducing errors and eliminating repetitive tasks.

In both accounts payable and accounts receivable, STP can transform the way payments are sent, collected, and reconciled by reducing manual interventions and errors while streamlining data sharing.

Many firms are still using legacy methods, such as paper checks and wire transfers, to pay for commercial goods and services. B2B businesses stand to gain the most from STP, as many of these companies are the ones that still rely heavily on paper-based processes and traditional check payments, which can be time-consuming and prone to errors.

Bork: STP shouldn’t simply be a financial option, but rather a strategic business imperative.

By implementing a payment-processing strategy that includes STP capabilities, these companies experience significant improvements. In a report from the Association for Financial Professionals, 46% of organizations stated that the primary reason for moving away from paper checks to electronic payments was to facilitate STP for their business.

At its core, an STP system is designed to expedite the remittance and settlement process for payments. The primary objective is to streamline payment operations, ensuring that once a transaction is initiated, all the necessary activities involved in payment processing are automated from beginning to end. The beauty of STP lies in its ability to eliminate the need for manual intervention, resulting in reduced errors and a considerably faster and more efficient payment workflow.

Traditionally, when payments were received through paper-based or manual methods, numerous steps had to be completed before confirmation. This involved tasks such as initiating a telephone confirmation, coordinating transfers across different departments, and enduring a waiting period for funds to be received and processed by the recipient’s bank. With the implementation of STP initiatives, this arduous process has been digitally transformed.

STP allows businesses to integrate payments directly into their digital Enterprise Resource Planning (ERP) platforms. This integration enables the automatic tracking and transfer of payments, all within a secure and streamlined framework.

As there are several benefits of STP, from efficiency to real-time actionable data, let’s take a deeper look at some of these benefits and how they are transforming transaction processing.

  • Faster Payments: Faster payments enable a significant reduction in processing time, resulting in faster transaction turnaround and shorter payment cycles. With STP, businesses gain enhanced control over the timing of each transaction, allowing for better financial planning and management.
  • Accurate and Actionable Data: Eliminating the need for manual data entry and processing with STP greatly reduces the risk of errors and contributes to better data availability, reliability, and overall accuracy.
  • Real Time Insights: STP provides businesses with greater visibility into their transactions and cash flow. Real-time insights enable businesses to make informed decisions promptly and respond swiftly to changing market conditions.
  • Increased Efficiency for Accounts Receivable Staff: By automating repetitive tasks and reducing the need for manual intervention, AR teams can redirect their focus toward higher-value activities, such as strategic financial planning, customer-relationship management, and business growth.
  • Security and Fraud: Automated payment authorization ensures quick and secure processing without the need for manual intervention, reducing the risk of fraudulent or unauthorized transactions.

With an STP system, accurate settlement and routing information can be saved in the system, avoiding manual entry of payment details and costly errors for banks and customers. Traditional payment methods often result in lost or incomplete data, creating negative ripple effects up and down supply chains. In fact, in a survey conducted by Strategic Treasurer, 46% of AR professionals reported receiving unusable remittance information.

For B2B businesses, adopting STP shouldn’t simply be a financial option, but rather a strategic business imperative. The benefits are clear. They show that by automating and optimizing the flow of transactions, STP enhances efficiency, minimizes errors, and amplifies productivity, allowing businesses to focus on strategic financial planning and business growth.

David Bork is head of AR solutions at Boost Payment Solutions

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