When was the last time an error was made when processing your clients’ accounts or payroll? Has it happened more than once in the past few months? Don’t be despondent if so. The fact is, the technology may be stacked against you.
In this blog we look at:
- Why payment errors are so common in accounting and payroll
- A breakdown of how they’re costing accountancy businesses
- What you can do to remove them
Why payment errors are so common
In recent years software has appeared with the aim of digitising accounting and payroll processes, making life easier for accountancy practices. And, in many areas they have. However, when it comes to actually processing payments, this is often not part of the package.
There’s a reason for this. Software vendors don’t have the in-house capabilities to offer payments directly. They don't have the expertise to navigate the payments ecosystem (accessing schemes, regulatory licencing and permissions and more). Payments have therefore never been something that accounting and payroll software providers have been able to consider, on their own.
Therefore, while certain aspects of their work have been enhanced through technology, making payments has remained relatively static for accountancy firms. Data needs to be inputted manually, which is a painstaking process, and then a CSV file is usually uploaded to a banking portal.
And that’s just one of the ways it can happen. For many accountancy practices, different clients prefer to do things in different ways, perhaps even using different software. Clients may differ in how much of the payment processing they do themselves, meaning challenges can occur around file sharing, security and meeting deadlines. Accountancy and payroll bureaus need to accommodate all of that, and therefore be skilled in handling payments in a variety of ways.
It’s easy to see where mistakes can creep in. Frankly, there are many potential points of failure. Matching a payment to the wrong bank details, the recipient providing incorrect details, a payment being duplicated on the file, a payment being omitted from the file, a downloaded file being sent to the wrong client. And there are plenty more.
Just as accountancy practices need to handle payments on their own, they’re tasked with fixing errors that occur on their own as well. It’s not just frustrating, it’s costly, for multiple reasons.
The visible costs of payment errors
As your business is probably aware, accounting and payroll errors incur chargeable costs.
If a Bacs file is rejected, which can happen for a number of reasons such as missing or incorrect information, your firm may have to pay up to £100, or pass this cost on to your client. Then there’s changing the file you’ve uploaded. If you realise you’ve made a mistake and want to make amendments or reupload the file, you may have to pay up to £300 to change it.
If you need to reverse the file, this can cost up to £2,000. You may be able to swallow these costs, if they happen once in a blue moon, but if they are regularly occurring, your profit margins are taking a real hit for entirely preventable reasons.
The worst part? There are also hidden costs under the surface, and these are harder to put a value on.
The hidden costs of payment errors
Loss of business
Most businesses could probably accept that an accounting error is understandable and forgivable. But two? Three?
There is no shortage of accountancy providers. How many payment errors before a client decides to put their faith (and business) elsewhere?
If your biggest client decides to go another way, you’ll need to replace a considerable amount of earnings.
Reputational damage
If certain clients decide to stop using your accountancy practice, that isn’t necessarily the end of the hidden costs. Word can spread, which may convince others to also look at alternatives and limit your ability to attract new business.
It is not just about errors made with business payments, but interactions with HMRC. Late payments here can result in fines and further impact your good standing.
Reviews on sites like Trustpilot and Google have become increasingly important and getting rid of a low score is never easy. It’s impossible to put a number on how much this could cost your business, and there will be a continual loss of potential earnings until it improves.
Wasted staff time
When errors occur it’s not just a case of sending off a payment. Accounting teams have to fix them, going through huge payment files manually to diagnose what has gone wrong and make manual corrections.
This takes time and as you grow, may even require you to make more hires so that normal duties can still be fulfilled. If that happens it’s a new lifetime cost for your business that you may not have been anticipating and really, shouldn’t need.
Even before errors occur, training new staff to use multiple systems takes a long time. All of these aspects, whether chasing errors, sending out corrected forms or learning to use outdated approaches, represent time that could be spent on value-add areas of your business.
Removing errors and removing cost
If errors, and needing to correct them, just seem like they’re part of the job, think again. This difficulty comes from payment processing being kept separate from accountancy software. Now, that doesn’t have to be the case.
Payment providers such as Modulr can now embed payments directly into accountancy software platforms, making it quick and simple for them to offer full payment services without becoming payments experts or regulated themselves.
By using accountancy software with payments embedded within the service, many of the manual processes accountants perform can be automated, eliminating the points of failure in payment journeys. Separate accounts can be created for each of your clients, so you have a clear and comprehensive view of all payment flows, further reducing the chance of errors.
Modulr’s direct access to the UK’s Faster Payments System also cuts the cost of emergency payments, in more ways than one. Using the Bacs payment scheme to make an amendment or emergency payment has certain costs attached, but will also start the three-day cycle again, which may cause considerable reputational damage to your practice.
With Faster Payments access, you can process an amendment or emergency payment within 90 seconds – 24/7, 365 days a year – all at a more affordable price.
Modulr’s payment infrastructure, designed specifically for accountancy use cases, gives your business access to all of these features, and is already integrated directly with existing accountancy software such as Sage, BrightPay and more, enabling you to keep using the system you're familiar with, but make it do more for you.
As Wendy Bott, founder of The Accounting Pig testifies: “We no longer have to double check that clients have paid their staff correctly. I simply generate a report from BrightPay for their approval and then make payment through Modulr. It’s saved over 80% of time it would have taken before.”
Many of the hidden costs of errors come through a chain reaction. Errors occur which your accountancy practice needs to pay for, you then lose business from the number of errors, which then impacts your reputation, making it harder for you to earn new business. Pricing your services also becomes increasingly difficult as you don’t know how many hidden costs you’re likely to incur, and pricing in a way which seems unfair will only further hurt your reputation.
Stop the errors, stop the chain reaction. And upgrading your accounting software to one with integrated payments is the best way to do that.
You can speak to your software provider about accessing Modulr’s payment system, or if you prefer, reach out to us and we can guide you through how it works today.