Daily Payment Runs Are Not As Common As You Might Think
Many would guess that for companies who have USD $5B or more in annual revenues, the practice of daily payment runs by Accounts Payable would be the norm. That guess would be wrong. Surprisingly, while roughly half of the large global companies process payments on a daily basis, the other half are making payments on a weekly basis, and, in some cases, less frequently.
Recently an iPollingTM question from a manufacturing company with over $100B in annual revenue asked the question, “What is the frequency of your company’s Accounts Payable payment runs?” with the follow-up question, “On what day of the week does your company settle payments?” The company that created the poll currently has daily payment runs; however, they are considering changes that might positively affect their processes and cash flow.
Using Peeriosity’s powerful custom research capabilities, within two days of creating the iPoll, 37 peer companies responded, providing the member with the facts about their processes and procedures. In addition, because poll results provide details for who responded, including their first name, job title, company name, and global region represented, everyone had an at-a-glance view of the range of approaches followed, with the ability to directly contact other respondents using Peer MailTM to further explore individual responses.
Here are the details for the first question regarding the frequency of payment runs:
The results from the second question provide some excellent exposure to when other major companies settle payments.
Here are some of the additional comments provided by members:
· We process ACH payments daily, but only cut checks once a week.
· Europe payments are issued weekly. Mexico payments are made Tuesday & Thursday. US payments are made Monday & Wednesday.
· Payments are made daily to all suppliers and customers in accordance with their payment terms. Payments for due dates which fall on the weekend or a holiday are sent the following business day.
· Payments are both made and settled daily.
· Primarily, we process the payment files on Tuesdays; however, there are a number of other payables that are processed daily. Settlements occur daily.
· We pay 3rd parties and employees on a daily basis. Foreign currency payments are two times per week, and intercompany payments are once per month.
· In North America, we run paper checks on Fridays. Electronic payments (for example, EFT and Virtual Card) are run daily. In Europe, electronic payments occur daily.
· For the U.S. operating units, we have payment runs as well as settlements each business day, for both paper checks and electronic payments.
· Standard payment runs are bi-weekly on the 1st and 15th of each month. Ad-hoc or emergency payment runs may also be completed on a weekly basis, but make up a much lower proportion of total volume and spend.
· Most company codes are paid weekly. The specific day depends on the company code.
· We perform weekly payments, so the bulk of payments occur on Sunday. We still have daily payments, but they are the exceptions (for example, for utilities and to secure vendor discounts).
One of the comments, in particular, summarized the business case associated with selecting the timing of payments:
- Paying daily has the highest internal processing costs but allows us to maximize our cash flow by paying at the most advantageous date considering discounts and extended terms. We continue to analyze the timing of payments and maintain flexibility to change to what makes the most sense.
What is the frequency of your company’s Accounts Payable payment runs and what day (or days) of the week does your company settle payments?
Who are your peers and how are you collaborating with them?
1 “iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in the iPoll.
Peeriosity members are invited to login to www.peeriosity.com/shared-services/ to join the discussion and connect with Peers. Membership is for practitioners only, with no consultants or vendors permitted. To learn more about Peeriosity Click here.