London, 14th June 2018 – Reconciliation costs firms on average over £560,000 annually due to errors and manual processes associated with legacy payment systems, according to new research from Optal. Optal found that half (49%) of the surveyed organisations admitted making supplier payment mistakes — a figure which rose to 100% in some sectors like telecoms and oil & gas.
An expert in optimising B2B transactions, Optal commissioned Davies Hickman to poll over 100 finance decision makers in some of the UK’s top public and private sector organisations, 94% of which have 1000+ employees.
It found that large organisations are forced to spend a huge amount of time, effort and money on the reconciliation of B2B payments.
Of those surveyed, 11% have 50 or more employees dedicated to the task, with the average standing at 16 staff members — although the figure went as high as 150 employees in some organisations.
This means the total average wage bill could be around £415,000 for reconciliations alone. Once additional employee costs such as training and overheads are included (at approximately 135% of wages) the sum reaches just over £560,000 — representing a £60m bill for those organisations polled.
The need for extra staff to take care of reconciliation is partly driven by the errors that are rife in B2B payments processes.
The Optal report also revealed a growing interest in newer, automated solutions which can accelerate reconciliations whilst improving their accuracy.
A majority of those finance leaders polled (57%) said they were attracted by the prospect of Virtual Account Numbers (VANs) to provide enriched data for faster reconciliations. The data associated with many current payments systems such as BACS and SWIFT is extremely limited, which can lead to reconciliation errors.
VANs are single-use, 16-digit card numbers supported by the global Mastercard network, allowing firms to pay their suppliers quickly, simply and securely. Reconciliation is automatic and immediate, reducing the administrative burden and minimising human error in the back office.
“Reconciliation is an important part of any back-office finance department, but it shouldn’t require a huge and costly team. UK firms are spending millions just to maintain the status quo of expensive, error-prone manual processes,” said Andrew Downes, General Manager at Optal.
“However, it doesn’t have to be this way. Our research shows over half of finance chiefs are keen to try VANs, which automate and provide enriched data to overcome the challenges associated with legacy systems. With VANs optimising reconciliation, organisations can invest more into initiatives which will grow the business.”
Mastercard is focused on improving how businesses pay and get paid. Together with Optal, Mastercard is working to bring the speed, security and convenience of VANs and other innovative payment solutions to more B2B sectors.