“Measure twice, cut once.”
It’s an English proverb we’ve all heard before, usually in a context other than woodworking. Its ubiquity is for good reason – it’s just common sense advice. Taking the proper time before you engage in any task ensures that needless errors are avoided, especially when moving at the breakneck speed of today’s business environment. It’s a smart practice that’s applicable to virtually any job you do.
There is one task where this principle is largely absent, however, and that’s in payment processing.
Corporations worldwide make billions of payments to banks every day in the course of doing business. Yet they generally do so without first validating that the information surrounding that payment (amount, bank details, payment codes, holidays, etc.) are correct to make sure that the payment will actually arrive. The result is a rejected payment that can cost upwards of $75 in fees to correct — not to mention all the other ramifications of a payment gone awry.
The impact of failed transactions to business is serious, some of them immediate and quantifiable and some more long-term and insidious:
- Seventy-eight percent admit the finance team spends more than 10 minutes rectifying each failed Direct Debit; with 14% taking more than 30 minutes per transaction
- 43% of finance teams spend more than four hours every month fixing problem transactions; and 11% take more than 10 hours each month
- Almost three-quarters (71%) of businesses admit failed Direct Debit transactions damage customer and employee relations; 36% said they result in a higher business cost to secure revenue
When payments took 2-3 days to process there was ample time to correct errors before they became a problem. That luxury is now long gone in most cases. As faster payments become more widely used, there is no extra time. Not only are payments moving faster than ever before, they’re also irrevocable. That’s a big problem, especially when human error is often the cause of a failed transaction.
It is perhaps unsurprising that human error is the cause of the vast majority of payments failures, with bank account and / or bank code error – accounting for 71% of failed transactions.
In this day and age, with technology able to support the success of business in virtually every way imaginable, there’s no reason organizations should have to deal with faulty data input, outdated reference data and keeping up-to-date on rule changes. There are also no excuses. Payments have to be correct the first time or else corporations will face serious consequences in terms of late fees, lost efficiency, non-compliance and damaged customer relationships.
But how can this be achieved?
Streamlined, error-free processing of single and bulk payments to suppliers, payroll and other recipients is not only attainable, it’s easy.
There are a number of Bank validation tools out there, and the fastest, simplest path to achieving efficient payments is to implement one at once.
As with anything, however, some are better than others. Look for one that offers up-to-the minute global payments reference data that will keep you compliant. The best tools will also enable you to check all customer account numbers and payment codes/IBAN and BIC details to confirm that they’re up to date, and if not, provide the correct ones where possible. Additionally, a worthwhile tool will also provide you with Payment Purpose Codes (where required), holiday data and other key information that if incorrect will fail a payment.
By implementing a bank validation solution you can instantly validate payments before they’re made — minimizing the cost of errors — and also finally let go of the burden of trying to keep up with all of that data yourselves, a task that is a severe detriment to more important aspects of your business.
Concerned about the cost? Implementing this type of tool (using API technology) is far more cost effective than you’d think. Certainly more so when you consider the alternative – paying to correct rejected payments.
Ensuring that your payment is correct on the front-end costs pennies, whereas paying the price for a failed payment costs $75 in fees and extra work for your business to correct.
In today’s world of hyper competitiveness in business, it’s important for organizations to take every advantage they can get. It may seem like a simple thing, but getting payments right the first time is an important step in taking your business to the next level, reaping rewards in terms of cost reductions, increased efficiency and improved business relationships.
A former professional squash player and founder of Apply Financial, Mark Bradbury has 30 years’ experience starting and running financial solution providers. He specializes in payment automation.