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Automating
International Payments
Advantages for Law Firms Expanding Globally  

Anthony Loiacono October 7, 2016

Globalisation of the legal market is still growing as law firms tap into the potential that cross-border markets offer for expansion. For Accounts Payable, this means firms venturing into international opportunities also face cost control challenges and making foreign payments involves significant risks and more work compared to domestic payments; increased operating costs and demands on staff time.  Firms still relying on a paper-based process will need to understand, and minimise, the risks associated with operating globally.

Risks and Challenges

Law firms establishing a presence in other countries will find that international markets represent a new financial backdrop, one which holds real challenges for the Accounts Payable team, including managing the foreign exchange element and regulatory compliance

Accounts Payable teams face many operational challenges without the added weight of international payment processing. Often, the AP business process is paper-intensive and complicated, with workflows that are clumsy and hard to track. Maintaining accurate paper trails, tracking down critical documents, and handling exceptions all consume time and resources, slow down processing and increase the risk of errors, which can affect the ability to project and manage cash outflow accurately. Expanding internationally is a good time to stop and evaluate the current AP business process for ways to make it more efficient, less people-and-paper bound, and less costly.

What is Currency Risk?

Currency risk and unpredictability are embedded in every cross-border payment. Foreign exchange fluctuations, arising from the volatility in the currency markets, can be significant when suddenly moving money from one country to another, and between currencies. Doing business internationally means either finding the most favorable exchange rates or risk loss – an effort that is both time-consuming and challenging. The foreign exchange market, accessible 24 hours a day, five days a week and spanning multiple time zones, exposes firms continually to the FX market’s currency fluctuations and changes.  In addition, many cross-border suppliers pad their prices, or shorten their payment terms, to reduce the risk of their currency depreciating against the dollar.

Depending on the transaction volume, monitoring changes manually may not be a workable solution.  The amount of effort required to keep track on exchange rates is significant, resulting in new demands on staff time and cost. Accounts Payable departments are rarely equipped to deal with the workings of foreign exchange and international payments.

Ensuring Foreign Payment Procedures are UK Compliant

Payments to vendors, entities, or individuals in the EU/EEA are governed by compliance requirements and various regulatory agencies, including:  HMT, FCA,The European Union and other overseas bodies such as the  Office of Foreign Asset Control (“OFAC”).  Added to the burden of finding the most favourable exchange rates for your international transactions, ensuring compliance further erodes employee time, takes resources away from essential department functions, and drives costs up.

So Why Develop a Foreign Exchange Strategy?

The AP Process is paper-intensive and complicated, with workflows that can often be inefficient and hard to track.  Maintaining accurate paper trails, tracking down critical documents and handling exceptions is time-consuming; slows down process and increases the risk of errors. Expanding internationally is a good time to evaluate current AP business processes to develop a strategy that provides efficiencies and saves costs.

Developing a strategy involves identifying and minimising risks and should include the following steps:

The Benefits of Automation

Engaging with a specialist offering seamless integration provides the ultimate protection to minimise currency fluctuation together with many more benefits that automation provides:

“Firms with a payment automation solution in place achieve significantly higher levels of satisfaction across every area of the payment management operation. The right automation solution can improve AP workflow, help AP departments handle international and domestic payments more efficiently, and reduce operational costs and risks” The Gatepoint Research, March 2015

The market offers several options to address the AP business process and workflow automation – options include integration with your financial management and/or ERP systems; “touchless” processing direct from your supplier; document recognition and scanning; e-invoicing, and approval routing and notification via desktop, tablet or mobile devices.

Full-service automation solutions are available in a variety of forms – by implementing an in-house financial or ERP software system, or by working with an outsource partner for AP and integrated online international payments processing, or through an arrangement with a Software-as-a-Service (SAAS) provider.  Some firms adopt an integrated approach, with a workflow-driven financial or ERP system and an online international payments provider. Whichever approach, the result should be an end-to-end solution with a single workflow that processes the invoice from initial request to payment, and sorts, extracts, and stores multiple fields in the firm’s internal data repositories as needed.

Automation enables firms to know exactly when their international payments are executed, at what price, and how they are transmitted, eliminating fluctuations in the final cost to the firm and improving the ability to forecast the financial position accurately.

An Aberdeen study, “From the Shadows to the Forefront:  AP Automation and the Strategic Vision” in October 2013, shows that Best-in-Class adopters of AP automation technology were able to process invoices at 17% of the cost of Laggards (bottom 30 of survey respondents). In addition, they were 7.4 times as likely to capture early payment discounts, an incremental savings that contributes directly to cash flow. As the lifeline of cash flow, superior performance in the Payables (A/R and AP) business process has a clear impact on the firm’s bottom line. For firms looking to minimise the impact of “going global”, and at the same time, enhance financial forecasting integrity and attain their strategic goals, Payables is one of the best places to start.

If your firm is considering operating globally or already does, it may be worth ensuring that your international payments process is up for the challenge.