No matter how we look at it, businesses need to deal with money. A successful business has to make money to pay for its expenditures and keep itself running.
Still, not everyone has the luxury of entire accounting teams handling financial matters. Manually dealing with cash disbursements and liquidation can take up a lot of time – this is where payment management systems come in.
An Overview of Payment Management System
A payment management system (PMS) is a platform for a company’s monetary transactions. It handles expenditures, cash disbursements, among other matters of cash management.
It is an essential aspect of a company’s operations. No matter the type of service, every successful business transaction ends with payment.
Businesses also have regular expenses to track and maintain. These include inventory purchases, vendor payments, rent, and utility expenditures. A PMS helps you stay on top of these transactions.
You can program your PMS to accommodate cash, credit card, or bank deposits. They can be pretty flexible, especially with today’s rising preference for online payments. In 2019, the value of digital transactions reached $4.1 trillion worldwide. Researchers expect this number to grow at a rate of 13% until 2023.
Payment management systems are pretty flexible. Businesses aren’t the only ones using them. They are also popular among schools, healthcare providers, and federal government agencies. The U.S. Department of Health and Human Services uses a PMS, especially for grant payments for grant recipients.
Standard Features of a Payment Management System
All PMS platforms have their differences. Everyone needs a good selling point. But, good payment management systems have some standard features. Think of these as the bare minimum that could ease your workflow instead of complicating it.
It’s best to select a PMS that already has all the necessary features. Not only is it more time-efficient, but it will also save you your other precious resources. Here are some features that your payment system should include.
Every business transaction starts with an invoice. Your PMS should give you an option to create and manage invoices for your clients.
There are two options for this. You can manually generate invoices through the billing information clients enter upon purchasing. Or, you can go the automatic route. The PMS software generates the invoice as soon as the client confirms payment.
The same is also true for outbound or in-company payments. A PMS should help you generate and track invoices for the company’s disbursements. You can use it to pay your vendors or reimburse employees for company expenses.
After invoice generation, your PMS should have the capacity to process payments. It should connect to the client’s bank and transmit the funds to the merchant’s account.
The most efficient systems can process payment requests within seconds. It starts with the point of purchase when the customer decides what their payment method will be.
After the PMS connects with the client’s bank account, it will facilitate the fund transfer. Thus ends the payment processing, which can either be a success or a failure. If the payment fails, so will the transaction, and the client can try again.
Invoice and Transaction Recording and Tracking
Your PMS should be capable of tracking and managing all your invoices. Think of it as a one-stop-shop for all your financial transactions.
Seeing your transactions in one place helps you keep track of everything to avoid missing a payment. One glance should tell you which payments are pending or completed.
Sure, you can track each of your accounts separately, but this method might be more prone to error. A good PMS should minimize the manual work you have to do to focus on the more essential things.
For every transaction, your PMS should be able to generate receipts. These are necessary for every business’ transaction records or clients’ personal use.
A good bonus would be the capability to generate both physical and digital receipts. Every business has different needs and might require either or both to operate.
One of the most important perks of a good PMS is making it easier to generate reports and analytics. These are essential to get a comprehensive look at your financial standing.
Going through all your transactions for a specific period can take a while. Then, you have to figure out any patterns or trend changes for these periods.
Automating this process can save you or your accounting department a lot of time and effort. There is still a lot to do, and automation can ensure that you focus your human resources on the essentials.
What to Look For in a Payment Management System
So you’ve narrowed down your choices according to the necessary features. Aside from those, there will be other factors you should consider.
Think of these as tie-breakers. You can weigh each factor depending on your company’s priorities. Considering these and the features we mentioned before, you can get a PMS that suits your needs.
Payment management systems can come in different price points. Most of the time, the number of features can affect the cost, as you will be paying for several services.
For example, all-in-one PMS platforms can cost a bit more when compared to ones that only have one or two features. Go with the best PMS you can get within your budget.
You are dealing with cash and sensitive information. It’s a no-brainer to choose a trusted PMS with robust security features. It’s a fair practice for your customers and payees alike.
Before signing on with a PMS provider, make sure to inquire about their security systems. It also wouldn’t hurt to do your research. You and your clients’ data security should be a top priority.
Mobile and online payments are gaining a lot of traction. It’s only wise for businesses to get on with the times.
Sure, cash and cards aren’t phasing out soon, but it’s best to give your customers different options. In the same vein, your PMS should be flexible enough to accommodate these new payment methods.
Before signing up for any paid service, it’s best to get a free trial. This way, you can get firsthand experience of how the platform works and feel if it fits your workflow.
Most PMS platforms readily offer free trials. Otherwise, you can call them up and request one, especially if what they offer interests you.