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In our next edition of the series of the craziest things we see in procurement is the practice of insisting on getting a cheque and clearing it before applying a credit to a vendor account, which, although a convoluted process, does come up often as a "low-hanging fruit" for teams looking to optimize efficiency.
As the fourth article in this series (one and two and three are here) we consider the alternative, that by transitioning from a paper-based process to modern digital payment methods and eliminating the need for cheque clearances, you can significantly reduce manual interventions, minimize the risk of errors, and expedite financial transactions. Consider how in further detail below.
What
The Traditional Process
"In some cases, an overpayment occurs or there might be other reasons for the vendor owing something to your company. Traditionally, vendors often send a cheque for the credit amount. (And let's pause for a moment to ponder – why are we still relying on checks/cheques in this digital age? It's high time to embrace electronic payment methods like EFT, ACH, or wire transfers!) Once the vendor's cheque arrives, the company embarks on a tedious waiting game, patiently anticipating the cheque to clear. Anyone who's ever tried to expedite the process of clearing a cheque in the US knows that it's far from swift or efficient. It can be a frustrating and time-consuming experience.
This traditional approach involves accumulating a backlog of transactions, waiting for cheques to clear, and only then manually applying the credit within the SAP system. It's a cumbersome and inefficient process that has its roots in the historical preference for paper-based payments. However, in today's digital age, there are more efficient alternatives that allow you to collect, process, and clear payments electronically, thereby sidestepping the drawbacks and inefficiencies associated with the traditional cheque-centric approach."
Directly in SAP
In contrast, Shaun shares the secret to streamlining the entire process of vendor account management. Under this moder modern process when a credit is due, a credit memo is generated within the SAP system. Then as soon as the credit memo is issued, it seamlessly reflects in the vendor account. There's no need for manual entries or reconciliations, reducing the chances of human errors creeping into your financial transactions.
Taking The Next Step
For those ready to take the next step in this transformation, we encourage you to reach out to a member of the ConvergentIS team to help understand your current situation and if removing physical cheques from your process is a low-hanging fruit ready for your taking.
Wondering how this fits into your business objectives? See where it aligns using your personal copy of the Business Case Workbook.
