Learn how colleges and universities are leveraging the power of electronic payments, encouraging collaboration between treasury and procure-to-pay functions and mitigating payment fraud with technology-based vendor solutions. 

Colleges and universities are executing a dramatic shift from paper to electronic payment methods and using a combination of old-school and technology-based vendor solutions to mitigate payment fraud risk, according to a U.S. Bank cash management webinar for higher education featuring Vanderbilt University’s treasurer. Here are some of the trends and related strategies the panelists covered:

Continued migration to electronic-based procurement and payment processes.

In an instant poll of webinar attendees, fewer than one-third said check was their dominant method of vendor payment. Vanderbilt, which has 13,500 students, has executed a major shift away from paper the past dozen years, according to Trey Beasley, assistant vice chancellor and treasurer at the private university in Nashville, Tenn.

“In the 2008-2010 period, 90% of our vendor payments were by check and we were issuing roughly 200,000 paper checks a year,” Beasley said. “That has evolved to where 90% plus are either ACH or virtual cards, and we’re only writing about 6,000 checks a year.”

The migration required Vanderbilt to educate vendors on the benefits of getting paid electronically, to have university finance leadership turn a spotlight on the high costs of issuing checks, and to institute a pro-electronic payments policy. “We are not onboarding a vendor unless we can pay them electronically, be that ACH, virtual card or wire,” Beasley explained.

Industrywide, the shift to paying students electronically may be even more pronounced. Only 11% of instant poll respondents reported that checks were their dominant method for student payments. Vanderbilt has been most successful in migrating to electronic per diem payments for student athletes and is now focusing on increasing electronic payments to the general student population and research participants, Beasley said.

Payments fraud remains one of the most challenging risks for higher education financial professionals to manage.

When it comes to fraud, Beasley said his “radar is always up.”

A big threat to schools is fraudsters, pretending to be vendors, who call and ask payments to be redirected to an account they control, Beasley said. Vanderbilt uses a third party to verify the legitimacy of such requests. But the school has also thwarted a number of such scams through its own manual sleuthing. “We get the name of the vendor, do a Google search, call a contact and get the banking information separately from what they sent our payment folks, and compare the two,” Beasley said. “It’s a little bit old-school, but it works” to identify fraud attempts, he said.

Another panelist, Tony Grayson, vice president and sales manager at U.S. Bank, noted that virtual card solutions can mitigate a lot of fraud risk by eliminating the need to store supplier banking information. In addition, panel moderator Madison Donnini, vice president and a working capital consultant at U.S. Bank, pointed to the value of bank account validation services which can verify that any account number provided is owned by the school’s vendor.

Colleges and universities benefit when their procure-to-pay and treasury professionals collaborate.

The procure-to-pay function is a major source of cash outflow in higher education, and those outflows impact treasury. As a result, procure-to-pay and treasury managers need to communicate with each other about payments.

Before joining U.S. Bank, Grayson was a procure-to-pay manager at Vanderbilt working with Beasley. While at Vanderbilt, Grayson said he understood treasury’s conservative philosophy of keeping plenty of cash on hand to pay bills, and he would discuss with Beasley the plan for making large supplier payments. Sometimes it made sense to send a fast virtual card payment; sometimes it didn’t.

Explained Beasley: “To the extent that Tony and I could get in synch 24 hours before and know this is what we’ve got headed out the door the next day, that would help us plan for liquidity events.”

Collaboration between treasury and procure-to-pay, migrating to electronic payments and employing a range of fraud mitigation tactics are all winning strategies in higher education, the panelists advised.

Watch the webinar: Cash management for higher education

Contact us to learn more about these and other trends and strategies impacting higher education cash management.