10 Threats to Successful Payout Orchestration, and How to Overcome Them

Executing efficient and accurate cross-border payouts is more critical than ever. All businesses are global and all businesses must be aware of the implications of this global presence.

We’re often asked, “What are the top threats I should be paying attention to?” 

So, we put together a list. 

This post explores the top 10 challenges businesses face in streamlining cross-border payouts and offers real-life examples along with practical suggestions for overcoming these hurdles.

Ambiguous Payout Procedures

Unclear payout procedures can lead to confusion, delays, and inaccuracies in disbursing funds. For example, a company without a standardized process for calculating and distributing commissions to sales representatives may struggle with delayed or incorrect payouts. To avoid this, businesses should establish clear payout policies and ensure all team members are well-trained and familiar with these procedures and systems.

Fragmented Payout Systems

A company using multiple payout systems without proper integration may find it challenging to manage and coordinate these platforms. This can lead to delayed or incorrect disbursements, as was the case for a large enterprise that had to manually reconcile payouts between its payroll system and third-party vendor payments. By investing in system integration, businesses can enhance efficiency, reduce errors, and streamline their payout processes.

Compliance Challenges

Regulatory and compliance requirements complicate the payout process. For instance, a company operating internationally must comply with various tax withholding and reporting regulations for each country it issues payouts to. Failure to do so may result in fines or even suspension of business operations. Companies should collaborate with legal and compliance experts to ensure adherence to all necessary requirements.

Data Quality Concerns

Poor data quality can lead to errors such as incorrect payee information, inaccurate payout amounts, incorrect payout methods, or wrong currency conversions. A small business with a data entry error, for example, might inadvertently underpay an employee, make duplicate payouts, or execute a payout in a method that costs the payee a significant portion of their earnings. To mitigate these risks, companies should implement data validation processes and invest in technology to help detect and correct errors.

Fraud and Cybersecurity Threats

Fraudulent activities and cyber-attacks can disrupt or delay payouts, or even cause them to fail. For example, a business could fall victim to a phishing scam, resulting in unauthorized access to its payout system and fraudulent disbursements. Companies should prioritize cybersecurity by implementing robust authentication measures, monitoring transactions for suspicious activity, and educating employees about potential threats.

Ineffective Risk Management

Without proper risk management, the payout process can be exposed to fraudulent activities or unexpected errors. A large corporation that fails to monitor its payout processing for signs of fraud, for example, could suffer significant financial losses as small payouts, made frequently, often fall under the radar. To prevent this, businesses should develop a comprehensive risk management strategy that includes regular audits, fraud monitoring, and robust controls.

Scalability and Performance Limitations

Poor scalability and performance can lead to delays in payout processing, resulting in dissatisfied payees and a negative brand image. A growing gig economy platform that experiences a sudden surge in user growth, for example, may struggle to process payouts promptly. To address this issue, companies should invest in scalable payout processing solutions and optimize their systems for peak performance.

Insufficient Resources

Without adequate resources, it can be difficult to support the volume of payouts that need to be processed. A small nonprofit organization that relies on volunteer staff to manage its grant disbursements, for instance, may struggle to keep up with increased demand. To overcome this challenge, businesses should allocate sufficient resources to payout processing and consider outsourcing or automating tasks where possible.

Limited Visibility

Without proper visibility into the payout process, it is difficult to track disbursements, identify errors, and ensure accurate payouts. An online marketplace that lacks real-time reporting capabilities, for example, may struggle to identify and resolve payout discrepancies. By implementing tools that provide comprehensive visibility into payout processing, businesses can more effectively manage and monitor their operations.

Human Error

Human errors can occur during manual tasks such as data entry, resulting in incorrect payouts or delayed disbursements. An example of this could be an accounts payable clerk who transposes digits in a vendor's bank account number, causing the payout to be sent to the wrong account. To minimize the impact of human error, companies should automate manual processes where possible and implement strong checks and balances to catch mistakes before they become costly problems.

Payout orchestration is a critical component of any business's financial operations. By understanding and addressing the 10 threats to successful payout orchestration, companies can improve their payment processing efficiency, reduce errors, and ensure timely and accurate payments.

Investing in robust systems, standardized processes, and adequate resources will help businesses overcome these challenges and maintain a competitive edge in today's global, digital economy.