Posts By Karen Kroll

Leaders in AP Continue to See Reduced Costs

Tuesday, June 29th, 2010

When it comes to accounts payable, best-in-class companies continue to forge ahead, streamlining processes and cutting costs. In fact, a recent study, “Global Payments: Maximizing Cash Flow with Electronic Payments and Process Automation,” by Aberdeen Group found that top firms need less than five days to process a transaction. That compares with more than nine days for average performers, and nearly 16 for laggards. The top performers also have seen their AP processing costs drop by more than 14 percent annually, versus an average decline of 3.3 percent, and a slight increase in annual processing costs among the bottom 20 percent of companies.

Several attributes are common to many high-performing AP departments. For starters, they are 21 percent more likely to have established centralized processing or a shared service center for accounts payable than other firms. In addition, these firms are 37 percent more likely to have fully automated their procure-to-pay processes. (more…)

Posted in AP Industry, Shared Services, Technology | No Comments »

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Come January, the backup withholding rate will change

Thursday, June 24th, 2010

As you no doubt know, many payments that are reported on Form 1099 can be subject to backup withholding, including interest and dividend payments, rents, profits, and commissions. Backup withholding comes into play under certain circumstances, such as when the payee neglects to provide a taxpayer identification number (TIN) or the IRS sends the payer a notice that the payee has furnished an incorrect TIN, the IRS notes.

A payer that fails to carry out backup withholding when it’s required may itself be liable for any amount that should have been withheld, according to information from the accounting firm, Deloitte.

What’s received less attention is the fact that the current backup withholding rate of 28 percent is scheduled to expire at the end of this year. According to information from the IRS, it will revert to 31 percent. That’s because the request to extend EGTRRA, or the Economic Growth and Tax Relief Reconciliation Act of 2001, does not include keeping the backup withholding rate at 28 percent. So, the rate will revert to 31 percent, or the level that was in effect before EGTRRA.

Although the change is still six months out, AP professionals will want to begin identifying the changes to their systems and procedures that they’ll need to make in order to shift to the new rate.

Posted in 1099 Reporting, Tax ID Numbers | No Comments »

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TIPRA Section 511: Mandatory 3 percent withholding on government purchases

Wednesday, June 16th, 2010

One provision within the 2006 Tax Increase Prevention and Reconciliation Act (TIPRA) is generating concern on the part of both businesses and governmental agencies. Section 511 requires many government agencies to withhold three percent from most payments for products or services they purchase. The change applies to government agencies with annual procurement budgets of $100 million or more, and to most purchases $10,000-plus. Some types of transactions are exempt from the legislation, including payments of interest and payments to tax-exempt organizations.

This provision initially was to go into effect for payments made after December 31, 2010. However, the stimulus package, AKA the American Recovery and Reinvestment Act of 2009, delayed the effective date for one year. Now, purchases made after December 31, 2011 will be subject to the mandate. (more…)

Posted in AP Industry | No Comments »

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Tackling The “Middle Ground” of Payments

Tuesday, June 8th, 2010

A growing number of businesses today are tackling the “middle ground” of payments – or the spending that falls between very low- and very high-ticket items, and that is done with suppliers that may not be high-volume, but that still invoice regularly, according to a recent report by J.P. Morgan. After all, the ends of the payment spectrum already have been taken care of, at least at many companies. Purchasing cards usually work well for low-dollar, frequent purchases, while ACH capably handles high-dollar transactions.

To target this group of payments, which so far, has largely been paper-based, companies are turning to single-use accounts. They’re also expanding their use of p-cards. (more…)

Posted in AP Industry, Technology | No Comments »

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Payment Card Fraud

Tuesday, June 1st, 2010

A recent study by Richard J. Sullivan of the Federal Reserve Bank of Kansas City looked at security within the payment card industry. As its title indicates, “The Changing Nature of U.S. Card Payment Fraud: Issues for Industry and Public Policy,” focuses primarily on potential public policy responses to payment card security. Even so, it offers insight and information of use to accounts payable professionals.

Since 2005, at least 2,221 breaches of card data in the U.S. have been made public; these encompass nearly 500 million records. Just eight extraordinarily large breaches – TJX, TD Ameritrade and Heartland Payment Systems, to name a few – account for about four-fifths of these records. So, while nonbank payment processors accounted for just two percent of the breaches, these covered nearly 40 percent of the records compromised. Nearly two-thirds (64 percent) of breaches are the work of outsiders. However, more than a fifth are a result of accidental disclosures by insiders. (more…)

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Posted in AP Industry, Technology | No Comments »

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Payment Terms: New Versus Existing Customers

Wednesday, May 26th, 2010

When it comes using payment terms to either woo new customers or keep existing ones, most companies appear to treat both the same. That’s the result of an April  “quickie survey” conducted by PMMI, or the Packaging Machinery Manufacturers Institute. About 60 percent of respondents offer the same terms to both new and old customers, while 14 percent offer less-rigid terms to existing customers. Another quarter said the terms depended on the company’s credit history.

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Posted in AP Industry | No Comments »

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AP Around the World

Monday, May 24th, 2010

This year, world trade is expected to jump by 9.5  percent, the World Trade Organization forecasts. That’s great news, considering that it contracted by 12.2 percent last year.

At the same time, managing cross-border transactions can present challenges for accounts payable departments. For instance, who would know that payment information for transactions in Japan has to be provided in Katakana, a Japanese writing system, according to this presentation by Citibank? What’s more, many of the international trade resources available online focus on exporting. While the information is important and there’s no doubt that exports are critical to the economy, it’s of little use to an AP manager who is trying to figure out how to pay a supplier located on the other side of the globe.

That said, a number of resources can help you get a handle on international payments. Listed below is a sampling: (more…)

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Mobile Payments Are Slowly Moving Into The B2B Space

Friday, May 21st, 2010

When it comes to paying their bills or checking their bank balances, consumers increasingly are relying on their cell phones. More than one-quarter of consumers with Internet-capable cell phones have used them to access banking records, up from 22 percent a year ago. What’s more, 20 percent had used their phones to pay bills, nearly double the 11 percent that had done so in 2009. The findings are the result of a recent survey by NACHA and several other organizations.

While consumer acceptance of mobile bill payment is growing strongly, B2B may not be far behind, according to this story in American Banker. According to the article, cells phones soon may be able to convert checks to ACH payments. That would work well in the B2B space, where checks still dominate. In fact, they account for between 65 and 80 percent of supplier payments, according to a 2007 survey by the Association for Financial Professionals.

(more…)

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Posted in Technology | No Comments »

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The Durbin Amendment

Wednesday, May 19th, 2010

Last Thursday, the Senate voted to approve an amendment, SA 3989, sponsored by Senator Dick Durbin of Illinois. The amendment inserts a section, “Reasonable Fees and Rules for Payment Card Transactions,” into the Electronic Fund Transfer Act. As you might guess from the title, the section sets forth several guidelines covering the transaction fees that an issuer or payment card network can charge on debit card transactions; the amendment doesn’t address credit card transactions. (more…)

Posted in AP Industry, Technology | No Comments »

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Improving Supplier Diversity Programs

Monday, May 17th, 2010

Just how well do most supplier diversity programs work? A new study by research firm The Hackett Group indicates that many companies make several key errors in managing these initiatives. To start, too few focus on developing programs that further their corporate goals. Instead, they may focus on meeting certain numbers, or gaining recognition from their customers or within their industries. Not bad goals, to be sure, but they may not provide all the value that a more comprehensive approach might. Even when the programs align with corporate objectives, management often fails to ensure alignment at the operational level.

In addition, most rely on overly simplistic measures to evaluate their programs, Hackett found. For instance, about 90 percent of organizations track their percentage of spending with diverse suppliers. However, fewer than half the study participants track the percentage of overall suppliers that is made up of diverse suppliers. Moreover, only 10 percent analyze the impact of their supplier diversity efforts on revenue or market share. (more…)

Posted in Supplier Information Management | No Comments »

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