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Payment operations is an umbrella term that refers to the entire lifecycle of money movement for a company. This includes initiating payments, setting up approval processes, tracking and attributing sent and received funds, resolving payment failures and returns, reconciling transactions to bank statements, and booking payments to the general ledger.
Companies keep track of these workflows via numerous systems, from bank portals and spreadsheets to Enterprise Resource Planning (ERP) software. Smooth, organized, and efficient payment operations are critical to a well-functioning company.
How have payment operations evolved?
The idea of a barter system, or the exchange of material goods or services for other goods and services, dates back to the Neolithic era. These individual transactions were clear and manageable, often directly between two parties.
Even in the modern era, moving money between a few different parties seemed manageable when most payments were made by cash and check, though large companies often required teams of accountants to close books. Now, however, companies are handling tens of thousands of transactions, representing millions of dollars, every day. The transactions are sent and received though varied payment methods and run across a number of bank portals.
What does the future of payment operations look like?
New technology and growing demand for convenience and efficiency are transforming how money moves—such as the emergence of real-time payments (RTP) in the last few years—and how companies keep track of it too. This transformation increasingly calls for automation and a programmatic means of managing transactions at scale; without it, manual processes can become quickly complex and lead to errors across the payments lifecycle, be that initiating a payment to the wrong account or being unable to reconcile payment to a bank statement.
According to a recent survey, many companies have plans to modernize their existing payment operations processes to better automate payment flows. Having digital tools, dynamic software, and flexible APIs will help with finance team productivity, faster payments, reduced risk, fewer errors, better customer service, and greater insight into finances.
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Explore the fundamentals behind back office finance processes and the accounting principles underlying them.
Gross merchandise volume (GMV), also known as gross merchandise value, is the total value of the goods or services retailers sell over a set period.
ISO 20022 files are a collection of XML-based schemas which standardize any type of financial message.
Month-end close is a critical process where the accounting team reviews and records financial transactions to close out the month.
While both are essential for managing online transactions, there are several differences between payment processors vs. payments gateways.
Revenue recognition is a key accounting principle in which a company records its revenue as it earns it, not necessarily when paid for.
Treasury Management Systems (TMS) are software applications that serve to help businesses simplify their payment operations by automatically tracking things like cash flow, assets, investments, and more.
BAI2 files are a cash management reporting standard. They are widely accepted by banks across the United States for exchanging data regarding balances and transactions.
Incoming payment details are notifications that a company is going to receive a payment it didn’t originate—meaning the receiving funds were not initially requested.
Nacha files are the standardized file format that banks use to initiate and manage batches of ACH payments. These files help banks execute large volumes of ACH payments through The Clearing House (TCH) and Federal Reserve.
Payment controls help accounts payable (AP) departments avoid losing money due to fraud, late payment fees, and other errors. They are a necessary part of a company’s overall payment operations to keep payments secure, accurate, and authorized.
Account-to-Account (A2A) banking, sometimes also called Me-to-Me banking, is the transfer of funds from one account to another account.
Asset risk management is essentially a fusion of asset management and risk management.
Bank reconciliation is the process of verifying the completeness of a transaction through matching a company’s balance sheet to their bank statement.
Batch processing is a method of processing various types of transactions. As the name suggests, transactions are processed in a group or “batch.”
In business terms, float refers to the time delay between the movement of funds from one account to another.
Cash forecasting is a way for companies to look at “cash in” vs. “cash out” for a business over a window of time.
Cash management is the monitoring and maintaining of cash flow to ensure that a business has enough funds to function.
Cash pooling is a centralized cash management tool that companies with multiple subsidiaries sometimes use to optimize the cash balances of all legal entities.
The term "cash position" pertains to the quantity of cash or assets that can be readily converted to cash, held by an individual, company, or financial institution at any given moment.
Continuous accounting is the ongoing process of updating a business’s general ledger with reconciled bank statement transactions as soon as they become available.
Electronic check presentment (ECP) is the process of electronically submitting a check to a bank for payment.
IBAN, or an International Bank Account Number, makes it easier and faster for banks to process cross-border financial transactions.
Liquidity management provides visibility into cash positions over past, present, and future dates and provides an overview of the financial health of a business.
Payment operations is an umbrella term that refers to the entire lifecycle of money movement for a company.
Recoupment refers to the recovery of spent or lost funds, especially in business operations.
Two options for financial transaction settlement—differing in both speed and style—here, we’ll look at how both Net Settlement and Gross Settlement work in action.
Treasury management is the act of managing a company’s daily cash flows and larger-scale decisions when it comes to finances.
A banking API is software that facilitates a digital connection between a company and a bank.
Popular in the banking and finance world, penny tests are a simple way to verify the validity of a bank account or bank integration, prior to a large finance transaction taking place.
Sweep accounts are a particular type of bank account where funds are automatically transferred between different accounts to optimize the use of available cash and maximize returns
Identity Verification APIs allow businesses to streamline the process of checking the identities of new users by automatically, and in some cases instantly, verifying their provided identifying information.
An invoicing API allows companies to create, send, manage, and reconcile invoices, as well as track related payments end to end.
The issuer identification number (IIN) is the first eight or nine digits on a payment card tied to the financial institution that issued the card.
An MT940 (Message Type 940) file is a detailed SWIFT statement that provides information about account transactions.
An OFAC check is a screening process used by financial institutions, businesses, and government agencies to ensure that individuals or entities involved in a transaction are not listed on sanctions lists maintained by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC).
The Flow of Funds is the movement of money in and out of bank accounts.