Increasing Operational Efficiency through Electronic Payments: Updating Financial Practices in Higher Education Management
It is a widely known fact that colleges and universities are under increasing financial pressure. Publicly funded schools are facing flat or reduced government funding. Business departments throughout the higher education enterprise face pressures to increase both the environmental sustainability and cost efficiency of their management practices. Private and public institutions alike are dealing with ever-increasing healthcare costs, as well as a growing public outcry over the dramatically rising cost of tuition.
As a result, there are tremendous incentives for administrators to improve operational efficiency wherever possible, and the financial office can be an area of particular opportunity. However, despite the availability of new technology, key aspects of higher education financial management remain paper-intensive and dependent on outdated legacy systems. More specifically, while the adoption of electronic, automated tuition payments has advanced at breakneck speed over the last decade--with many institutions now processing nearly all of tuition payments electronically--the disbursement side has lagged behind.
Issuing paper checks for vendor, supplier and contractor payments, student tuition refunds, or employee payroll can end up costing institutions significant amounts of money annually in paper, printing, processing and mailing. Such systems also require large amounts of time and work for already-stretched campus finance personnel. Environmental sustainability is also top of mind for most higher education institutions, and a paper-based system consumes more energy and creates a substantial amount of physical waste.
Switching to automated, electronic processes for these transactions can greatly reduce these costs while dramatically improving efficiency. Electronic payments also can increase accountability by eliminating lost paperwork and offering an audit trail of more accurate and precise spending data.
However, there can be impediments to change. For instance, colleges and universities deal with a wide diversity of payment types and recipients, and institutions face concerns about compliance with federal regulations of electronic transactions. Moreover, colleges and universities often lack the resources or expertise to design, implement and maintain an in-house financial system.
To overcome these challenges, an increasing number of institutions are implementing solutions offered by financial services providers that focus on the unique needs of college and university management.
Common payment types that can benefit from the improved efficiency of electronic processes are vendor and supplier payments, and student payments and payroll.
Vendors and supplier payments
As they are at many other types of organizations, payments to vendors, suppliers and contractors are still largely done through paper checks and invoices at most colleges and universities. This can be a costly and burdensome process that can also lead to confusion in business departments about compliance with departmental spending limits, account history or current transaction status. And if sent by mail, checks can be slow to arrive and even get lost, delaying payment even further.
Purchasing cards (P-cards) and virtual card payments are two solutions that can help institutions improve the efficiency of these transactions by moving from paper-based to electronic payments.
P-cards or other electronic payments are faster, more secure and more transparent for both sides of the transaction. They also offer institutions greater fraud protection over paper checks and the ability to set spending limits by cardholder, department or time period. Supplier account information is more secure than with paper recordkeeping, and vendors can access transaction details and company spend information in real time. Electronic payments can be integrated with existing financial management or ERP software, making budgeting, financial planning and future strategy easier and more accurate for everyone involved. …