COVID-19 is going to be a generation’s shared memory, with its disruptive and generally negative effects. The lockdowns are increasing the size of the gig-economy workforce as some furloughed workers transition to a temporary income from any of the most in-demand jobs such as warehouse workers, cleaners, stockers and truck unloaders for grocery stores and pharmacies. Other growth areas include online communications, given that we can’t meet in person, and crowdsourcing as businesses search for swift solutions to lockdown challenges and plan modifications to thrive in a post-pandemic new normal. And it’s providing new challenges to payment systems.

Managing Pandemic-Proof Payables for Digital MarketplacesIn our recent Crowd 2.0 Virtual Crowd Summit, Rob Israch, CMO at automated payments company Tipalti, called on business leaders to take this opportunity to examine and modify their companies. No industry sector will be spared. Their aims should be to de-risk operations, look to at least maintain if not improve the service to customers and partners, and fix anything that could potentially damage customer and partner relations. And that includes payment procedures.

From his extensive career in Marketing, Rob knows the value of getting things right at every level of touchpoints with customers, partners, and any other key stakeholders (e.g. regulators, trade bodies, municipal authorities). Though Payables is a back office function, does it matter? Yes it does, and we will see why.

Getting into closer detail, he tabled three key areas.

  1. Find ways to do more with less, and apply technology where appropriate.
  2. Institute smarter cost and cashflow controls.
  3. Modernise, allowing for further remote-working scenarios

1. Do more with less

The key is greater efficiency. Inefficiencies ought to be easier to spot for a while and then rectify, as working from home has exposed many inadequacies. For example, many US companies still pay staff by check, a process that is now used far less in Europe. How can that work easily with people working at their homes rather than in a central office?

80% of US companies rely on a blend of fulltime and gig-economy/freelance workers. Paying everyone is no longer on the same day every month using the same process, and payables related to crowdsourcing can be problematic. Workers can be in different countries, using different currencies, and operating under different tax jurisdictions. And wherever they are, they want the reassurance that they will be paid in full (without bank charges or other transaction deductions), on time (without currency exchange delays), and through the method and in the currency of their choice.

74% of gig-economy workers say they would stop working for an employer over payment issues such as these. 71% say they would feel less loyalty to an employer who did not offer a choice of payment method and preferred currency. 

Cross-border payment methods are a key ingredient in future-proof payables’ procedures. A higher than necessary rotation of gig-economy workers reduces the proportion available who have accumulated company knowledge, and perhaps product or service expertise, to help facilitate global scaling (or more modest aims) at a faster pace. Gig-workers’ familiarity with your company has a value, so value them!

2. Don’t cut to the bone to achieve smarter cost and cashflow controls

Any business will still need to invest to grow, though it can be achieved alongside cost savings. Find unnecessary costs, like writing and mailing checks, or using wire transfers. Both are highly inefficient and exposed to fraud.

If you are paying workers in a variety of currencies, there are cheaper and faster ways than using exchange services provided by traditional banking service providers.

Most companies have a residual level of payment errors between 3% and 5%. Reduce that through automation and you realize a saving.

With an efficient payables system, and if cashflow allows, workers could be offered early-payment reductions. How much less would they accept in payment if they could receive it earlier? Any worker who takes up such an offer saves the company some cash.

Introduce a greater level of transparency with an automated 24/7 payment tracker facility. This allows anyone waiting for a payment to see what stage it’s reached, just the same as looking for a parcel we’re expecting from some online shopping.

3. Modernize with future home-working scenarios in mind

Do domestic internet connections for transferring payments information by email satisfy data security requirements and privacy regulations?

What’s the cost of recovering from a security breach compared to the costs of tighter security in the first place?

In Europe, everyone with access to and responsible for managing databases has to be trained in GDPR-compliancy and the data has to be stored in an encrypted manner. How much of that is happening with people working on home computers?

How much might some individuals submit to temptation and incidences of internal fraud increase if a company hangs on to payments by check or wire transfer?

Back office impact on front office image

Managing Pandemic-Proof Payables for Digital MarketplacesHopefully this summary of Rob Israch’s presentation helps explain the value of efficient back-office payable procedures go beyond reducing internal frictions and impact on what are more normally considered front-office concerns with customer and partner relationships. Every touchpoint, including the back-office, represents a brand experience and contributes to a company or a brand’s image. 

It’s based on feedback to him from Tipalti’s clients that include Google, Vimeo, Twitter, GoPro, Amazon and GoDaddy. In total, Tipalti manages annual payments for its clients exceeding $10 billion, and distributes them to over 4 million payees. I think it’s fair to say he knows what he’s talking about.