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- 1. Rx for Global Payment Pains 5 Reasons Why Mass Partner Payments Impede Your Global Market Potential Powering Global Partner Payments
- 2. our organization is grow- ing at lightning speed, moving into geographic territories and markets world- wide. The focus is sales, sales, sales and growth, growth, with- less notice given to back office payment processing. Still, the need to compensate the rising quantity of affiliates, publishers, suppliers, vendors, and other partnering organizations can’t help but steal senior manage- ment attention. Meanwhile, the repetitive manual effort required in making these mass global pay- ments is consuming more time, is increas- ingly expensive and prone with errors, and is numbing toil for those involved—their tireless labors confounded by the myriad ways and timeframes that payees want to Rx FOR GLOBAL PAYMENT PAINS 5 REASONS WHY MASS PARTNER PAYMENTS IMPEDE YOUR GLOBAL MARKET POTENTIAL TOO COMPLEX: THE MYRIAD OF WAYS PAYEES WANT TO BE PAID: • Wire Transfer • Domestic ACH (Direct Deposit) • Global ACH (eCheck) • PayPal • Debit Card • Western Union • Paper Check Y be paid, the different currencies involved in these disbursements, fast-changing and convoluted tax and labor laws, and the disparate methods of payment—wire trans- fer, ACH, direct deposit, PayPal, Western Union or paper check, among others. As mass payments become infinitely more intricate, labor intensive, time con- suming and at risk of fraud, that focus on sales and growth shifts to something as seemingly innocuous as paying someone. When mistakes happen, even more time and labor must be invested in the arduous exercise. There must be a better way to achieve both global growth ambitions and liberate Accounts Payable from their drudgery. The latter alone would reposition these intellectual assets to assist Finance & Accounting in attaining more strategic goals. The solution is automation. The problem is that traditional “nuts and bolts” ERP systems do not offer this functionality. You’re probably thinking that your orga- nization is simply growing too fast to pause and spend money on a global payment management platform. You’re wrong. Here are five reasons why your business must cure the pain that manual mass payments are inflicting on your people and your company, especially as your company expands globally. 1. The sheer volume of payments is not going down 2. Tax and regulatory compliance is a legal minefield 3. Currency qualms 4. The fear of fraud is real and growing 5. Financial reporting requirements ✻ 1 tipalti.com Rx for Global Payment Pains
- 3. As a company scales in size and scope, the need to process more payments scales with it. Past 50 payments, the time it takes to manually handle the volume increases significantly. Greater complexities arise as the organiza- tion buys, sells and operates in more global markets. An enormous amount of paper- work amasses. The company must collect an invoice from each partner, pay it on time in the right payment method, and fully comply with all local and national labor and tax laws. Once paid, the organization must rec- oncile these payments and have a system for tracking them. From a control and re- porting perspective, there is often no single repository for supplier payment data. Now, if your company makes a handful of payments each week, all of the above is less of a concern. But, in today’s blistering global economy, few organizations fit the old paradigm. Rather than conduct business THE SHEER VOLUME OF PAYMENTS IS NOT GOING DOWN #1 REASON 5 REASONS WHY Manual Mass Payments Impede Your Global Market Potential Boost Media start out by paying a few suppliers, but as their international growth takes off this quantity skyrockets. The San Francisco-based provider of optimized advertising solutions launched in 2007 with a few U.S. clients served by less than a dozen indepen- dent creative contributors. Back then Boost Media use PayPal as the means of compensating these suppliers. But by 2012, it had reached the point where it tallied hundreds of contributors around the world, many receiving small payments in the less- than-$75 range on a constant basis—a few dollars here and there causing migraines, and not just in AP. Senior management also felt the pain. “In the old days, this wasn’t much of a deal, as we were paying 10 people and I could easily write checks by hand,” said Rob Lenderman, Boost Media co-founder and Chief Oper- ating Officer. “But, with the business growing rapidly and the need for me to use my time more strategically, this was no way to make such mass payments.” Very quickly, PayPal no longer was an effective way for Boost Media to pay its contributors. “For one thing, it did not provide services in some countries,” Lenderman said. “Another problem was that some of our content providers live off their debit cards and checks, and PayPal doesn’t fit that model. We simply had to have an automated resolution to a situation what was spiraling out of control.” ✻ The PayPal Paradox CASE STUDY: BOOST MEDIA “In the old days, this wasn’t much of a deal, as we were paying 10 people and I could easily write checks by hand.” —Boost Media’s, Rob Lenderman with a limited number of vendors, hundreds if not thousands of suppliers are sending in- voices on an irregular basis. For a few busi- nesses, the payees are in diverse industries and geographic regions. A case in point is Amazon’s payees. The online eCommerce giant sells shoes, dishwashers, furniture, books, golf clubs and toothbrushes from millions of vendors across the world. Most organizations compensate a fraction of this volume of payees, but the pain nonetheless is palpable. So did global advertising platform Infoli- nks. “We had to complete hundreds to thou- sands of publisher payments each month,” recalled Yariv Davidovich, infolinks Presi- dent. “In satisfying payment demands from publishers from all over the world, we were dealing with three or four banking institu- tions every time a publisher payment was made, overloading our publisher support staff dealing with rejected payouts.” The rejections ran the risk of affecting its CLICK HERE TO LEARN MORE 2 tipalti.com Rx for Global Payment Pains
- 4. REASON #1 The Sheer Volume of Payments is Not Going Down close working relationship with these pay- ees, which could lead to serious retention issues. High on the wish list at both Info- links and Boost Media was an automated “In satisfy- ing payment demands from publishers from all over the world, we were dealing with three or four banking institutions every time a publisher payment was made, over- loading our publisher support staff dealing with rejected payouts.” -Yariv Davidovich, president, Infolinks payment management solution that would effortlessly attend to the arduous adminis- trative tasks arising from their fast-growing payment volume. ✻ When Infolinks and Boost Media were in startup phase domestically, paying vendors was no problem. But, as each company grew inter- nationally, a patchwork quilt of tax and reg- ulatory mandates altered this comfortable status quo. This is not to say that compen- sating hundreds of payees domestically is a walk in the park, administratively-speaking. Quite the contrary, as payees may want to be paid in different ways—ACH, direct de- posit, checks and so on. Say a company compensates a U.S.-based supplier via direct deposit. This payment must accurately reflect the payee’s name, bank name, account number and routing number. These four fields must be filled TAX AND REGULATORY COMPLIANCE IS A LEGAL MINEFIELD #2 REASON in correctly to ensure the payment goes through without a hitch. The problem is that the same four fields do not apply in most foreign jurisdictions. In Germany, for instance, instead of a routing number, the payer must enter the SWIFT Code on the payment. In India, it must enter the IFSC Code. In both cases, these codes involve a different arrangement and quantity of letters and digits. If payees want to be paid in a format different than a direct deposit to a bank, other regulatory is- sues arise. Multiply these administrative and regu- latory differences by several hundred ven- dors across more than two-dozen countries and the problems compound. Now toss into this mix constantly changing local and national tax and la- bor laws. Today, the paying entity may not have too muchtrouble complying with these rules, but what if they change tomorrow? Even for compa- nies paying suppliers in the U.S., the regu- latory milieu is com- plicated. Businesses that make payments to U.S.-based partners, suppliers and vendors are obligated to issue a Form 1099 to these payees and, at the end of the year, receive a 3 tipalti.com Rx for Global Payment Pains
- 5. CURRENCY QUALMS REASON #2 Tax and Regulatory Compliance is a Legal Minefield At crowdsourced online advertising services marketplace Trada, the company wanted to be able to disburse payments to payees the ways in which they wanted to be paid. “We wanted to offer additional pay- ment methods, while having the ability to make payments in many countries,” explained Matt Harada, Trada Vice President of Finance & Analysis. Trada also sought to improve compliance with the Office of Foreign Assets Control (OFAC), an agency of the U. S. Department of the Treasury under the auspices of the Under Secre- tary of the Treasury for Terrorism and Financial Intelligence. Com- pliance OFAC was a “huge worry,” Harada said. The same anxiety prevails at all other global companies. OFAC administers and enforces eco- nomic and trade sanctions based on U.S. foreign policy and national security goals against entities such as targeted foreign countries, terrorists, known money launder- ing organizations and international narcotics traffickers. A company that even unknowingly makes payments to businesses that are essentially blacklisted by the U.S. Treasury will be in regulatory crosshairs. Indeed, OFAC puts the onus of responsibility on the payer to identify such vendors and not pay them. If a growing business is manually sending payments in different ways and currencies to thousands of suppliers around the world, the possibility of overlooking a single forbidden entity looms large. ✻ Evil in the World CASE STUDY: TRADA Form W-9 in return. Not all suppliers re- member to send the document, however. With five payees, this is not a problem—the company sends an email or makes a phone call to remind the payee. But, if the orga- nization tallies hundreds of partners, obvi- ously this is not a practical means of alert- ing dawdlers. At present, there are 180 foreign currencies recog- nized as legal tender by the United Nations. Chances are your business is making pay- ments in more than just a few of these de- nominations. Obviously, paying hundreds of suppliers in a wide and growing array of currencies requires real time knowledge of exchange rates and translation values, the latter of import to compliance with FASB (Financial Accounting Standards Board). That’s just one challenge for organiza- tions making mass payments. Just because the disbursement to a partnering organiza- If a supplier is not registered as a busi- ness in the U.S., a Form W-9 no longer ap- plies. Instead, the paying entity must collect a Form W-8 document from the vendors. These forms exempt vendors in each case from providing certain information, but they vary widely, including Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY. Other complicated IRS requirements include the need to provide the applicable tax code with a payment to some, but not all foreign-paid entities. In Russia, the re- quirement is to include the payee’s unique tax code number with the payment, while in China the payment must include both the tax code number and the vendor’s phone number. You read that right. Many payers simply sidestep these is- sues by requiring their partners to receive payments the way the company prefers to provide them. Obviously, this is not the best way to cultivate and nurture close relations with vital contributors to one’s business. Even worse, those payment methods may not be accepted in certain countries which essentially limits your global growth markets. ✻ #3 REASON A company that even unknowingly makes payments to businesses that are essentially blacklisted by U.S. Treasury will be in regulatory crosshairs. CLICK HERE TO LEARN MORE 4 tipalti.com Rx for Global Payment Pains
- 6. REASON #3 Currency Qualms *http://www.itconsultingnj.com/60-minutes-story-claims-97-percent-of-businesses-have-already-been-hacked tion in India must be in Indian rupees does not automatically mean that all other pro- viders in that country will want to be paid in the same currency. Indeed, two different suppliers in the country may have different preferences—one wanting to be paid in U.S. dollars, the other in Indian rupees. For exchange pur- poses, the latter payee also might want to be paid in rupees that come from the U.S., as opposed to U.S. dollars that are converted into rupees in India. The same scenario might likely apply in other parts of the world in which payments must be executed. Errors are common, requiring additional payments to be made to reflect possible un- derpayments. At Boost Media, currency conversion was a financial pain point. “The fees were pretty high with PayPal,” said Lenderman. “This wasn’t an issue when we were in a couple countries, but when we were making In this era of ostensibly routine data breaches, ensuring you are paying whom you think you are paying has become problematic. Fraudsters are running rampant, concocting clever new schemes to illegally acquire funds intended for oth- er parties. A November 2014 60 Minutes report underlines the desperate situation, noting that 97 percent of all U.S. retailers have now been hacked.* A particularly vulnerable business is one that engages in Internet transactions. The e-commerce marketplace is rife with fraud, due to the virtual, intangible nature of many business-to-business dealings. For example, payments in more than 30 global regions it became too much to handle. Our goal is to eventually be in virtually every country in the world, paying multiple contributors in each. Fortunately, we were able to recog- nize this issue early on. In fact, it was what prompted our interest in an automated payments solution.” TouchOfModern also sought an auto- mated solution to its currency-related pay- ment challenges. The online eCommerce website, which focuses on high-end modern design products, frequently pays numer- ous foreign suppliers. This requires that it interact with multiple banking systems and compensate payees in a wide range of foreign currencies. Today, the company’s payments in all currencies are made from a single technology platform. Jonathan Wu, TouchOfModern's Chief Operating Officer, says the mass payments solution “signifi- cantly reduced time, effort, and any chance of error on our end while improving (the) security of our payments and cash flow management.” ✻ “Our goal is to eventually be in virtually every country in the world, paying multiple contributors in each,” according to Boost Media’s Lenderman. FEAR OF FRAUD IS REAL AND GROWING#4 REASON 5 tipalti.com Rx for Global Payment Pains
- 7. FINANCIAL REPORTING REQUIREMENTS REASON #4 Fear of Fraud is Real and Growing say a website displays another company’s advertisements and is paid on the basis of visitor click volume—$1 per click. It is not difficult for a hacker to generate fictitious clicks that seem like the real thing, which quickly add up to quite a bit of money. While an automated payment platform won’t detect such crimes, it can mitigate the impact by immediately blocking payments to the fraudsters. In the short time that MUNDO Media has implemented an auto- mated payment solution, the performance- based advertising network has been alerted Given the breakneck pace of today’s global economy, making mass payments to diverse suppliers and vendors in disparate countries, in wide-ranging currencies via different payment methods, and in compli- ance with always-changing national and lo- cal labor and tax laws, simply should not be about multiple suspected fraud issues that it was able to stop dead in their tracks. “We found that each suspected fraud- ster was somehow linked to other payees that were not previously detected,” said Phil Jones, MUNDO Media CFO. “We have since reduced the risk of fraudulent pub- lishers using our network and have poten- tially saved thousands of dollars in pay- ments we may have otherwise made.” The company also is leveraging the automated payment platform to provide the identity of known fraudsters to other networks. ✻ #5 REASON a manual process. Administratively attending to the differ- ent payment methods alone—direct deposit into a bank account, credit card payment, PayPal, ACH, wire transfer, Western Union or paper check—is a Sisyphean effort. Now add the requirement to report all this infor- mation accurately and ensure that payees “When we would pay someone a relatively substantial amount of money through PayPal, and this person then failed to report the income, the government would step in and shut down our business,” according to Lenderman 6 tipalti.com Rx for Global Payment Pains
- 8. THE CURE REASON #5 Financial Reporting Requirements are reporting the same figures. The latter challenge was an acute problem for Boost Media. “We do a fair amount of business in In- dia and hire a lot of writers in that country,” Lenderman noted. “When we would pay someone a relatively substantial amount of money through PayPal, and this person then failed to report the income, the government would step in and shut down our business. There was just no way for us to use PayPal and be compliant. We’d want to pay some- one in Morocco, for instance, and we’d hear `good luck figuring out how.’” Certainly, having a simple payment issue constrain a company’s business growth is Companies like Boost Media, Trada, Infoli- nks, TouchOfModern, MUNDO Media and many others that were beset by mass pay- ment miseries have taken the cure. They have invested in a global payment automa- tion platform that is helping them achieve skyrocketing business growth worldwide. They have reduced related expenses and liberated AP staff from their drudgery. To- day, they have firm control over the pro- cessing of mass payments and are able to easily track these transactions, discern ex- ceptions, reduce the risk of fraud, improve absurd. But, it happens more often than not. Alternatively, organizations can automate payment processes to easily reconcile pay- ments across different banks and entities, and then be able to quickly discern how these payments break down by country, vendor, currency, payment method, and so on. Armed with such vital business data, company leaders can make more insightful, informed decisions on where best to allo- cate resources. The bottom line, as these five reasons to automate mass payments make abundantly clear, is that manual payment processes are no way to operate a modern, fast growing international organization. ✻ supplier relationships, and achieve full compliance with all local and national laws and regulations. No longer do people like Rob Lenderman have to devote time and energy to his fast- charging organization’s payment problems. “It’s not an issue anymore; I no longer wor- ry,” he said. “We’re in control. And I am now purely focused on growing the business.” What would it mean to your company to be able to grow internationally without be- ing bogged down by toilsome, error-prone and time-consuming manual payments? ✻ Tipalti: The Ideal Solution for Mass-Payers For more information, visit tipalti.com Tipalti provides a complete global mass pay- ment management solution making it painless to pay partners around the world and serves over 250,000 payees, processing over $1 billion in pay- ©2015 Tipalti, Inc. All Rights Reserved. ments annually. Founded in 2010, Tipalti was created to address the difficulties associated with making mass payments and currently serves a wide array of industries. “We’re in control (of the organization’s payment problems). And I am now purely focused on growing the business,” says Lenderman. 7 tipalti.com Rx for Global Payment Pains Powering Global Partner Payments