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Many organisations process payments in a separate system, disconnected from their accounts receivable management solution. However, this separation introduces unnecessary complexity and risks. In this article, we explore why this approach remains the standard and the advantages of a fully integrated solution.
The traditional approach: separate systems for payments and accounts receivable
Many organisations use multiple systems. Payment processing takes place in a financial (accounting) package or a dedicated payment processing solution, while reminders, dunning, and customer communication are often managed in an accounts receivable system.
This creates a situation where Department A processes payments and links them to outstanding invoices, while Department B needs to be informed of changes in the customer’s outstanding balance. This can cause delays and errors. For example, if payments are processed too late, customers may receive an unnecessary payment reminder, leading to additional customer contact (and extra costs), workload peaks for employees, and longer wait times for customers.
Conversely, Department B may process write-offs, penalty interest, or other surcharges that Department A must be notified of. While system integrations can help, they remain merely data exchanges. These exchanges are often limited to what the integration allows and are rarely real-time, leading to multiple data sources and ongoing system-related communication.
Why do companies still use separate systems?
The main reason is historical. Many finance departments originally used their accounting system—including payment processing—for accounts receivable management. The finance department also leads many other processes unrelated to receivables management.
As soon as the demands of accounts receivable management exceed what the financial system can handle, companies often adopt a separate package or system, leaving payment processing within the financial administration.
This setup necessitates linking both environments, with different departments working in separate systems within the same order-to-cash process.
Another reason for maintaining separate systems is a lack of awareness. Many organisations do not realise that a fully integrated credit management solution, where different departments collaborate in a single system, is a viable option.
Lastly, there is often hesitancy—or even fear—around changing processes that directly impact cash flow, as multiple departments are involved.
The benefits of an integrated platform
A solution that integrates payment processing and accounts receivable management creates a single, real-time credit management system, reducing IT complexity and dependencies. This brings significant advantages:
- Improved internal and customer communication (including via a customer portal or app) due to real-time visibility into customer status and processes.
- A larger proportion of customer inquiries can be resolved immediately.
- A solid, simplified IT structure that enables smart, data-driven automation of credit management (the ‘one-touch’ principle).
- More efficient accounts receivable management with fewer errors and disruptions, reducing related correction costs.
- Fewer customer inquiries and disputes lead to faster payments.
Beyond these business benefits, there are IT advantages as well. With reduced IT complexity, maintenance and administration costs decrease, eliminating the need for additional IT workarounds such as Excel sub-ledgers or RPA solutions. The financial administration can also be optimised for its core function.
Conclusion
Although separate systems for different departments remain the norm, this approach is far from optimal. A fully integrated credit management solution reduces errors, increases efficiency, lowers costs, speeds up processes, and improves customer relationships.
