Business owners are increasingly becoming aware of the systems and processes in their business that can be automated or outsourced to achieve more time for them. One of those processes is sorting out payment runs, which basically entails paying suppliers or those who have carried out a service which requires payment. The standard tradition of a financial administrator in a business manually going through invoices and receipts and paying individually are all but over.
Fortunately, payment runs is a dedicated bookkeeping service we carry out at Nordens, helping to streamline your payment system so that suppliers are paid efficiently whilst you are given the time to focus on the real nitty gritty in your business.
We spoke to Nordens’ Cloud Division Manager, Hollie Watson, on the process of payment runs, the increase in demand for these types of services and the reasons behind this, as well as the common pitfalls that arise and how to get over them…
What is the process of completing payment runs and what does it involve?
Basically, payment runs run a very simple manner. An external bookkeeper or financial administrator would usually review the payable list and identify everything that is outstanding and create a batch payment. This is a compilation of all the outgoings needed into one set payment, for the director to make on their own accord to a separate bank account. A lot of the time what happens in businesses is the director will pay invoices received one by one, accumulating lots of time doing so.
In a payment run, the director is requested to pay the total of the batch every week, fortnight, or month (whatever they prefer). Once the bank receives the money, they tie up all the references together and distribute the money out of the batch to all the suppliers and payees who need payment. On the accountancy end, all of those references are collated and uploaded digitally through the accountancy platform Xero which then links to the other platform Dext, informing the bank of the appropriate accounts and amounts.
Has there been an increase in the demand for this type of service over the past year or so, why do you think that is?
I think there definitely has been an increase as the world of working has shifted over the past few years with the pandemic. Whether people work remotely, or hybrid, we’ve seen a huge change in behaviour when it comes to the workplace and processes like paying suppliers and invoices are bound to change with it. The emphasis for many businesses now is getting successful and streamlined systems in place, particularly when it comes to finances.
Gone are the days pretty much when the company finance department are asking the directors to pay for this and that invoice individually. You need a regimented process so that the directors and business owners can focus on the main things in their business, which is needed more than ever now with the cost-of-living crisis we’re in. All it takes is once a week, fortnight, or month, you review everything that is outstanding, compile and input them, and then set up your payment date. With the increase in outsourced services such as Virtual Assistants, bookkeeping, Virtual Finance Assistants, booming since the pandemic, we’re seeing more and more demand for payment runs and I think this will only continue to grow. A lot of the time as well, businesses have a bookkeeper who works externally, and they handle the lists of outgoing expenditure, so this is just an added on service for them instead of duplicating the task by having someone in house sort out the payments.
How can accountants keep a detailed check on the work that payment runs involve and how do they keep on top of a client’s expenditure and outgoings successfully without constantly pestering them?
What a lot of individuals and businesses will do is have a specific accounts email address that is set up so that suppliers can email straight through any invoices payable. That email can then automatically be set to forward into the accounting platform which is then identified by the relevant bookkeeper. This fully streamlines procedures, with that invoice or bill then going into the payables batch list that will be paid on the appropriate payment date specified.
As long as your bank reconciliation and your outstanding list is all up to date, there’s no chance of human error as input is pretty much non-existent from the client’s end, whilst the outsourced bookkeeper has all the details entered into the platform. This means the bookkeeper doesn’t need to communicate with the directors at all.
What are some of the most common complications and difficulties which arise when handling payment runs?
For me one of the biggest difficulties is adjusting to the process and accepting that this is the norm now. You sometimes get business owners who want to pay for a service, or a supplier, there and then but you need to get into the habit that this is the procedure and respecting that. As long as suppliers and invoices are paid on the due dates or in alignment with the business’s weekly payment run, everything is tied up. It’s not efficient to be making one off payments here and there, which many people do when they’re getting chased or if an invoice has just been sent through they want to get it sorted immediately.
Getting out of this mindset is crucial, as not only does setting the payment dates give you the power, it also provides the capacity to set clear boundaries for suppliers to adhere to in your business. Letting go is often a difficult thing to do in business, but with the rapid rise of technology particularly in the finance and accountancy sector, you need to be putting trust into the process.
As well as this, for bookkeepers you should always double or even triple check that all the details sent over the bank for reconciliation are correct and verified, which is a good habit to get into. Once all of these habits become embedded into your psyche, you’ll start to see the benefits instantly, freeing up your time, or even a previous team member’s time who used to spend hours trawling through receipts, invoices and bills, to focus on the bigger things in your business.
What platforms and software are used when doing payment runs? Are these up to scratch?
Many of the main accountancy platforms are adept at doing payment runs, however at Nordens everything goes through Xero, Dext and also Wise. There’s an initial £45 one off fee for Wise, and then after that the only thing that needs to be paid by the client is for processing fees. Xero is the overall software which puts everything into one place and what allows everything to be run through and consolidated, Dext is for clients to upload receipts, bills, invoices etc. which can normally just be screen-grabbed and directly uploaded, and then Wise allows you to successfully process the payments with the bank.
These are the only software we use, which makes the whole payment run service simple, hassle-free and perfectly integrated.
Finally, for anyone considering hiring/outsourcing payment runs, what bit of advice would you give?
My biggest bit of advice is that should you want to do payment runs in your business, make sure everyone in the company understands the process, not just the director. At the end of the day, everyone in a company has things that need to be paid for whether it’s an outsourced service, a piece of software or anything else that is relevant to the business. For example, in construction there may be a site manager who requires something to be paid for, a solicitor may need to pay a fee earner, so definitely communication and a bit of quick training for everyone in the particular business to show them that this is the process now, is highly recommended.
Also, a big thing from the accountant’s side is ensure that all suppliers, or anyone who is requesting payment, to send their invoice in the correct file format which is usually a standard PDF. Check with the accountancy platform you’re using, but informing the relevant people straight away that this is the process to follow, will definitely save you time going back and forth should the file format need adjusting.
We hope this has outlined to you the benefits of undergoing a payment run service. If this interests you, or you’d like to add this service onto your existing set of services we carry out at Nordens, then please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.