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Put payments at the heart of outsourced finance

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Successful practitioners explain how bulk payments added a new dimension to their virtual finance services.

21st Feb 2023
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As the founder of FD Works, Bristol-based accountant and cloud tech enthusiast Jonathan Gaunt has years of experience in trying to find new ways to help clients. The service line he regularly champions in this field is often overlooked by practitioners: bulk payments.

“Once we got access to that kind of capability, it got me thinking - this is an additional service we can offer clients,” he said.

In a recent AccountingWEB article on payment apps, Paul Layte of Next Level Business explained that over the past two years, managing client payments had become the firm’s fastest-growing service. 

“We’re shifting many millions of pounds on behalf of clients every month. Demand has been so high because most of our larger clients have all given us their accounts payable and asked us to take care of it,” he said.

Layte’s experience typifies the growing trend for providers of outsourced finance services to take over payments on their clients’ behalf. The service would not be possible without the right online tools. As Jonathan Gaunt explained in a Tech Stack Session last year, when he first started exploring the possibilities, bulk payments were not available for high street small business bank accounts. That meant paying 30-40 employees could eat up 60-90 minutes of their time every month.

For Gaunt, the breakthrough came with an online app that uploaded payment details to execute them in a single pass, with levels of authorisation that don’t exist in the typical small business online bank account.

Gaunt and Layte are not alone. As the outsourced finance service model has grown in popularity over the past few years, more and more practitioners are adding payments to their portfolios. This article explains why, and how they are doing it.

Meeting your clients' needs

The first and most important reason for taking on payments as a service is client need. In the current climate, businesses are facing pressure on staffing and overhead costs and can see hours and hours of their finance staff’s time (or their own) eaten up by manually logging into bank accounts to make multiple payments.

Firms also need to get a stronger grip on spending and get instant insights into where they are with their cash flow. For external advisers, managing payments can provide visibility and trigger more targeted cost control conversations and greatly increase the value they can deliver for clients.

Cloud-based payment apps such as Modulr connect to cloud accounting ledger systems to create a single connected payments workflow. Linking the bank account back to the online books minimises the time it takes to complete the transactions and reduces the risk of human error by pulling payee details automatically from the ledger system. If the client still wants to control and approve outgoings, Modulr can send them email alerts of payments that can be approved with a couple of clicks.

These streamlined processes make it possible to turn client payments into a profitable service line that takes one of the most burdensome tasks off the client’s shoulders. With the time saved, business owners and managers can focus on things that will drive their business forward, like sales, developing new revenue streams or expanding into new markets 

Scalable and efficient payment processes

Alex Falcon Huerta set up Soaring Falcon in 2015 to provide a full, outsourced finance service to digitally savvy clients. For her, automating payments was an integral part of running an efficient back office from the start. “Having to send mandates out and get a wet signature before sending them to the bank was so painful.”

Online payments fit seamlessly into Soaring Falcon’s virtual finance infrastructure and for Phool Ashraf at specialist food & beverage (F&B) practice, Gains Accountants.

In-house or regular, collaborative bookkeeping on a cloud platform is a building block for their service models, as importing purchase invoices and reconciling them on a regular basis allows them to alert clients to any important variations from the budgeted amounts. 

For virtual FDs and their clients, the model extends from this bookkeeping base through to management accounts, cashflow forecasts, payroll and payments management. Payments are a common thread through all those different services, so having the right information to hand enables the external adviser to start much more meaningful conversations around budgets, forecasts and cost controls.

Avoiding payment traps and blockages

Processes alone do not make a successful outsourced service. Both parties must communicate and understand their responsibilities to make it work. If there is a service level agreement that payments will be made on specific days of the month, the client has to do their part by authorising them in good time. Who does what and when needs to be clearly documented at the outset, with processes and tools clearly specified.

Accountants are also aware of the potential risks of getting transactions wrong, not just for the amounts and reputations at stake, but for the time and effort involved in fixing payments that have gone wrong. 

Automated processes have a clear advantage on this point. Anyone who has tried to run bulk payments will know what a pain they can be to administer. Setting up Bacs payments is the most common method, but is expensive and time-consuming. Accessing the clients’ online bank accounts to make individual payments takes even longer and adds an extra level of security and error risks.

Online tools such as the Modulr Payments Dashboard reduce these risks by pulling payment data automatically across from accounting software to secure e-money accounts.

“Previously, we would be spending 25 to 30 minutes for every 12-15 payroll payments; checking bank accounts again and again, making sure every penny is correct and every deduction’s been made,” commented Phool Ashraf.

“Now, with the help of Modulr, this process takes us just 10 minutes. And that’s a huge difference. Beside the overall impact on payment workflows, we've also been able to make our verification process much more efficient and our accounting records more streamlined, so we’ve seen both direct and indirect efficiencies.”

Better client experience and demonstrable value

Offering outsourced bulk payments as part of a virtual finance service embeds the external finance team within client businesses and creates more profitable long-term relationships. For Paul Layte at Next Level Business, collecting the money, managing spending and monitoring cash flow are three killer services accountants can offer business clients. 

Automating payments automation is a key step to streamlining those processes so the accountant can deliver the enhanced visibility and control that businesses are looking for.

“We can’t manage cash properly unless we’re in control and see the ins and outs,” he said. “If we do credit control and see a big invoice not being paid, then we can delay or defer that week’s bill run so money is not paid out.”

Modulr automates all payroll, HMRC, and supplier payments, reducing processing time by up to 80%. As a result, we free up accountants and SMEs to focus on what matters most - their businesses. Visit Modulr's website to learn more  to learn more.
 

Replies (1)

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By Halex
23rd Feb 2023 12:10

Interesting and agree that there is scope to save considerable time, and expense compared with BACS. But is there dual authorisation at the point of submitting payment. Wise also offer a bulk payment service but I haven't yet set it up for use - the main concern being the lack of dual authorisation. Perhaps I've missed a trick. Anyone else tried it?

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