Payment Factory Optimizes Cash Flow While Reducing Risk And Boosting Productivity

Dave Fellers

Payment processing is a fundamental requirement in every company.

At the simplest level, all payments could be processed by a single business entity through one bank account and within the same ERP system. But in practice, that simple scenario has become very rare. Instead, most companies today must grapple with relatively complex payment-processing scenarios that involve multiple business units spread across several countries with – at the most extreme – potentially hundreds of bank accounts for disbursing payments.

For these companies, the use of a centralized payment factory can help cut through the complexity to boost productivity, visibility, and security while still meeting the needs of diverse local business units.

What is a payment factory? While there are varying approaches to the implementation details, most experts agree that the term, in general, refers to a centralized hub that is set up to control and manage processing of payment flows across multiple locations and/or business units.

Some of the key benefits of using a payment factory approach include:

  • Predefined and harmonized cash pooling and cash management methods
  • Centralizing, harmonizing, and streamlining banking relationships
  • Unifying and standardizing payment policies across multiple entities
  • Optimizing cash flows and cash availability
  • Increasing visibility and eliminating “hidden” cash repositories
  • Improving cash forecasts and reducing borrowing requirements
  • Integrating payment methods across multiple ERP/finance systems

Traditionally, payment factories have primarily focused on the payables function. However, as a result of regulatory pressures, the role of the treasurer is expanding into risk management. Thus the payment factory model must also evolve to be able to manage risk and assure compliance.

From a compliance standpoint, using a centralized payment factory enables comprehensive visibility to support enterprise-wide analytics and disclosure reporting while also retaining business-unit granularity to manage local cash availability, process optimization, and local reporting requirements.

Implementation of payment factory functions can be rolled out on an incremental basis, if desired, by bringing in only some targeted business units in the beginning and then expanding to include more as the program matures. However, to ensure a sustainable payment factory program over the long term, it is important to select a starting approach with a platform that integrates across diverse ERPs and can support a range of local country requirements.

Key features that should be considered for a comprehensive payment factory solution include:

  • Ability to connect multiple banks using different payment standards and data formats
  • Support for multiple ERPs and legacy finance systems
  • Support for a variety of payment channels and formats including bank transfers, debit notes, checks, or specific local formats
  • Mechanisms for inter-company clearing and settlement processes
  • Standardized user interfaces across all business units, along with the ability to mimic legacy UI features if needed
  • Integrated analytics for enterprise-wide visibility and reporting as well as drill-down, drill-through capabilities for local business-unit transaction tracking and analysis

In summary, implementing enterprise-level payment factory functionality can offer major benefits in terms of cash and working capital optimization. The inherent risks associated with sub-optimal local cash repositories and non-uniform compliance methodologies can be minimized. And overall cash flows can be optimized while still assuring needed autonomy and management for local business entities.

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Dave Fellers

About Dave Fellers

For over 25 years, Dave Fellers has leveraged business and technology solutions to help companies solve pressing challenges and improve performance. Since 1995, he has focused on applying SAP products to deliver real business improvements to organizations ranging from family-owned businesses to Fortune 100 companies in more than a dozen industries. Dave first joined Bramasol in 2007 to re-launch its professional services business. Since becoming CEO in May 2011, he has guided Bramasol to record-setting growth and revenues highlighted by the successful drive to serve the Office of the CFO in Accounting Compliance, Treasury and Finance Transformation, and a major acquisition that doubled the size of the company and gave it a global reach. Before joining Bramasol, Dave spent nine years at Deloitte, and started his career at Price Waterhouse where he first worked with SAP software. Dave is a graduate of Virginia Tech with a degree in Accounting Information Systems.