Cost Savings From Centralizing Bill Payments Methods Into a Single Platform

November 23, 2024

Business executives must focus on finding ways to reduce costs and improve financial management in order to remain competitive and ensure the long-term success. One strategy that can help to achieve these goals is centralizing bill payments.

In Germany, there are a number of payment method that can be used for business bills, including SEPA credit transfers, SEPA direct debits, debit cards, credit cards, checks, and other electronic payment systems.

In this article, we will explore the benefits of centralizing bill payments, provide examples of companies that have successfully implemented such systems, and discuss the role of technology in enabling businesses to centralize their bill payments. By the end of it, readers will have a better understanding of the potential cost savings and other benefits of centralizing bill payments, and will be equipped with the knowledge and insights needed to make informed decisions about implementing such systems in their own organizations.

Common Types of Business Payments Methods

In Germany and most EU countries, some of the most common payment rails include:

SEPA credit transfers: Bank transfer that allows businesses to move funds between bank accounts within the Single Euro Payments Area.
SEPA direct debits: This is a payment method that allows businesses to automatically collect payments from their customers’ bank accounts.
Debit cards: Allows businesses to pay vendors with a debit card linked to their bank account. A debit card is always pre-funded and bears no risk.
Credit cards: Allows businesses to pay vendors with a credit card issued by a credit institution. A credit card is more expensive and bears risk and interest.
Checks: Written and signed instrument that directs a bank to pay a certain sum of money to a specific recipient.
Electronic payment systems: Payment platforms, mobile payment apps, and e-wallets. They can vary in terms of availability, fees, and security measures.

A deep dive on SEPA Direct Debit

SEPA direct debit can be separated into two subsections.

SEPA Core Direct Debit and SEPA B2B Direct Debit are two payment types within the SEPA Direct Debit system, which is a payment method that allows businesses to automatically collect payments from their customers’ bank accounts.

SEPA Core Direct Debit is the most commonly used type of SEPA Direct Debit, and it allows businesses to collect payments from individual customers who have provided their consent to be charged in this way. This payment type is typically used for recurring payments, such as subscriptions or installment payments.

SEPA B2B Direct Debit, on the other hand, is a payment type that is specifically designed for business-to-business transactions. It allows businesses to collect payments from other businesses, without the need for individual consent from the payer. This payment type is typically used for one-time payments or for transactions between businesses that have a pre-existing relationship.

Both SEPA Core Direct Debit and SEPA B2B Direct Debit are secure and efficient payment methods that can help businesses to automate their payment collections and reduce their administrative overhead. However, it is important to note that there are some differences between the two payment types, including the requirements for consent and the types of transactions that are eligible.

In terms of consent, SEPA Core Direct Debit requires the payer to provide their explicit consent to the payee before a direct debit can be initiated. This means that the payer must actively agree to allow the payee to debit their account.

In contrast, SEPA B2B Direct Debit does not require explicit consent from the payer. Instead, the payer’s bank is required to honor the direct debit request unless the payer has specifically instructed the bank to reject it.

As far as the types of transactions that are eligible for each payment type, SEPA Core Direct Debit can be used for any type of consumer transaction, such as paying for goods or services, making a donation, or paying a utility bill. SEPA B2B Direct Debit, on the other hand, is typically used for recurring payments or for the settlement of large, one-time business transactions.

Overall, the main differences between SEPA Core Direct Debit and SEPA B2B Direct Debit are the requirements for consent and the types of transactions that are eligible for each payment type. SEPA Core Direct Debit is intended for use in consumer transactions and requires explicit consent from the payer, while SEPA B2B Direct Debit is intended for use in business-to-business transactions and does not require explicit consent from the payer. Therefore, businesses need to carefully evaluate the available options and choose the payment type that is most suitable for their needs.

The benefits of centralizing bill payments

Centralizing bill payments can bring a number of benefits to businesses, including cost savings, improved accuracy, and better financial management.

Cost Savings

One of the main advantages of centralizing bill payments is the potential for cost savings. By consolidating all of a business’s bill payments onto a single platform, it is possible to reduce administrative overhead and streamline the payment process. This can save time and money, as well as improve cash flow management.

For example, a business that currently uses multiple payment methods, such as online banking, credit card, and direct debit, may be able to reduce the number of payment methods to just one by using a centralized bill payment platform. This could result in significant savings in terms of the time and resources required to manage and process payments.

How to calculate cost savings from using a single payments platform

There are several ways in which cost savings can be calculated when a business reduces the number of payment methods it uses by implementing a centralized bill payment platform.

There are several ways in which cost savings can be calculated when a business reduces the number of payment methods it uses by implementing a centralized bill payment platform. One way to calculate cost savings is by looking at the administrative overhead associated with managing multiple payment methods. For example, if you currently uses online banking, credit card, and direct debit as payment methods, you will require additional staff (or at least input from multiple team members) to manage these payments, including processing the payments, reconciling accounts, and tracking outstanding payments. By consolidating all of these payment methods onto a single platform, you reduce the number of process steps — and time spent — that you need to manage payments, leading to cost savings.

Another way to calculate cost savings is by looking at the fees associated with using multiple payment methods. For example, several payment methods incur fees such as processing credit card payments, issuing checks, or processing direct debits. By switching to a centralized bill payment platform, the you can reduce or eliminate these fees, leading to further cost savings.

Finally, cost savings can also be calculated by looking at the time and resources required to manage and reconcile multiple payment methods. For example, a business that uses multiple payment methods may find that it takes a significant amount of time and effort to track and reconcile its payments, leading to inefficiencies and lost productivity. By using a centralized bill payment platform, the business can streamline its payment process and reduce the time and resources required to manage its payments, leading to cost savings.

Overall, there are many ways in which cost savings can be calculated when a business reduces the number of payment methods it uses by implementing a centralized bill payment platform. By looking at factors such as administrative overhead, fees, and time and resources required to manage payments, businesses can determine the potential cost savings of switching to a centralized bill payment platform.

Improved Accuracy, Reduced Risk of Errors and Fraud

In addition to cost savings, centralizing bill payments can also improve accuracy and reduce the risk of errors and fraud. By using a single platform for all bill payments, businesses can easily track and manage their spending, and can be more confident that their payments are being processed accurately and securely.

For example, a business that currently uses multiple payment methods may find that some payments are being made late or are being lost in the shuffle, leading to costly errors. By using a centralized bill payment platform, this risk can be greatly reduced, as all payments will be processed and tracked in a single, easily accessible location.

Better Financial Decision Making

Finally, centralizing bill payments help companies to better track and manage spending, leading to more informed financial decision making. By having all of bill payments in one place, executives can easily see understand their payment flows and can make more informed decisions about how to allocate their resources. This can help businesses to save money and improve their overall financial performance.

Overall, centralizing bill payments offers a number of benefits, including cost savings, improved accuracy, and better financial management. By consolidating all of their bill payments onto a single platform, businesses can save time and money, reduce the risk of errors and fraud, and gain greater visibility into their spending.

For example, a centralized bill payment platform gives specific transparency into departments or business units that are making the most payments to determine whether the allocation of funds to those areas is appropriate. If the controlling executives, such as a CFO or CEO see that a particular department or business unit is making a high number of payments, they can consider whether additional resources are needed in that area, or whether the allocation of funds to that area can be reduced.

Similarly, executives can also use a centralized bill payment platform to see which suppliers or vendors are receiving the most payments and can make decisions about how to manage those relationships. For example, if a particular supplier is consistently receiving a high volume of payments, leadership may decide to negotiate a bulk discount or to switch to a cheaper supplier.

Companies That Have Successfully Centralized Bill Payments

Many companies have successfully implemented centralized bill payment systems, leading to significant cost savings. Some examples of these companies include:

SoftTech GmbH, which was able to reduce its payment processing costs by 25% after implementing a centralized bill payment system.
eShop AG, which saved over €100,000 annually by centralizing its bill payment process and reducing the need for manual intervention.
RetailX Ltd., which streamlined its bill payment process and improved its cash flow management by centralizing its bill payments.

Note: We have changed the companies’ names to maintain anonymity

These companies used a variety of strategies and approaches to improve or introduce their bill payments. For example, SoftTech GmbH, a software consulting company with 60 employees implemented a comprehensive system that allowed their employees to easily submit and track their payment requests, and a dedicated team of decision makers to review and approve these requests. This helped to reduce the risk of errors and duplicated efforts, leading to cost savings.

eShop AG, an ecommerce company with 110 employees and annual turnover of €15 million took a different approach, focusing on integrating its various payment systems and platforms into a single, unified system. This allowed the company to easily manage and track its payments, and to take advantage of bulk payment discounts offered by vendors.

RetailX Ltd., a franchise-owner of several clothing stores focused on improving the efficiency of its bill payment process by automating as much of it as possible. By nature they had a complex supply chain and procurement to manage. With the increased focus on streamlining their bill payments, the started using automated payment reminders, as well as implementing a system for automatically scheduling and processing payments.

While these companies faced challenges before setting up their centralized bill payment systems, they were able to overcome them through careful planning and collaboration across departments. For example, SoftTech GmbH worked closely with its finance team to ensure that the new system met all of its requirements, while eShop AG trained its employees on the use of the new system to minimize disruption.

Overall, these companies demonstrate the potential for significant cost savings through the implementation of a centralized bill payment system. By streamlining their processes and reducing the need for manual intervention, they were able to improve their bottom line and better manage their cash flow.

The Role of Technology in Centralizing Bill Payments

There are various technologies available to help businesses centralize their bill payments. These include payment platforms, accounting software, invoice management systems, and finance operations platforms.

Payment platforms allow businesses to easily make and track payments to vendors, suppliers, and other parties. These platforms typically offer a range of payment methods, including credit card, bank transfer, and e-check, and often provide features such as automatic payment scheduling and reminders.
Accounting software allows businesses to manage their financial records and generate reports. This software can be integrated with payment platforms to provide a comprehensive view of a company’s financial transactions.
Invoice management systems help businesses to manage and track their invoices and payment requests. These systems typically allow businesses to create, send, and receive invoices, as well as to track the status of payments.
Finance operations platforms are a more comprehensive solution, combining the functionality of payment platforms, accounting software, and invoice management systems. These platforms provide a single, unified system for managing all aspects of a company’s financial operations, including payments, invoices, and cash flow.

By using these technologies, businesses can automate and streamline their bill payment process, making it more efficient and cost-effective. For example, payment platforms can automatically schedule and process payments, reducing the need for manual intervention. Invoice management systems can help businesses to track and manage their payment requests, ensuring that they are paid on time. And finance operations platforms can provide a comprehensive view of a company’s financial transactions, enabling better cash flow management.

Centralizing Payments Methods Into One Platform

In conclusion, centralizing bill payments can bring significant cost savings to businesses. By implementing a comprehensive system for managing payments, invoices, and cash flow, companies can streamline their processes and reduce the need for manual intervention. This can lead to improved profitability and financial stability.

Examples of companies that have successfully implemented centralized bill payment systems include SoftTech GmbH, eShop AG, and RetailX Ltd. These companies used a range of strategies and technologies, such as payment platforms, accounting software, and invoice management systems, to achieve their cost savings.

One technology that offers particularly strong value for money is the finance operations platform. These platforms combine the financial services (payments), the workflow automation for finance teams, and the handover into accounting systems, providing a single, unified system for managing all aspects of a company’s financial operations.

In summary, centralizing bill payments can bring significant benefits to businesses, and finance operations platforms offer a comprehensive solution for achieving this goal. CFOs and CEOs looking to improve their bottom line and better manage their finances should consider implementing a centralized bill payment system.