Modernizing Payables in the Public Sector
Moving Beyond Checks to Digital Payment Solutions
Beau Oliver, CPCP | Vice President, Specialized Product Sales, Bank of America
Key takeaways
- Digital payment solutions are now a best practice for public sector organizations seeking to improve efficiency, strengthen controls, increase transparency, and reduce manual processing.
- Successful modernization starts with a clear strategy and strong governance. Organizations that focus first on high friction payment types and take a phased approach are more likely to achieve lasting results and broad adoption.
- The cost of inaction will continue to rise. Reliance on checks increases fraud exposure, limits visibility, and perpetuates inefficient processes.
- Modernizing payables is not simply a technology initiative. It is a strategic opportunity to improve service delivery, strengthen stewardship of public funds, and build a more resilient financial operation.
Why Payables Modernization Matters Now
Public sector organizations are facing growing demands to improve service, increase transparency, reduce fraud risks and strengthen accountability, often without additional resources to support those efforts. These challenges have impacts across the finance teams which must balance staffing constraints and budget pressures while adapting to these growing demands.
Modernizing payables with digital payment methods such as card, ACH, and virtual card payments helps finance teams in reducing the challenges, high costs, and fraud risk associated with checks. In addition, these digital payment solutions also strengthen financial controls, reduce manual work, accelerate payment processing, and create opportunities for rebate revenue that can deliver measurable financial value.
Comprehensive Payables solutions, which consist of virtual card, private ACH supplier networks, and check outsourcing, help organizations bring these capabilities together within a single platform. By combining payment automation, supplier enrollment, payment processing, and reconciliation, organizations can submit a single payment file while suppliers are paid through the most appropriate method, whether ACH, virtual card, or check. This streamlined approach simplifies administration, improves visibility, strengthens controls, and accelerates the adoption of electronic payments.
Understanding the Current Landscape
Most public sector organizations recognize the value of digital payments, yet modernization efforts often face challenges that go beyond technology. Fragmented processes and decentralized responsibilities can limit visibility into spending and make it difficult to drive consistent payment practices across departments. As a result, organizations may struggle to improve efficiency and fully realize the benefits of a modern payments strategy.
Although secure electronic payment options are widely available, many routine expenses such as office supplies, travel, training, maintenance, and subscriptions continue to be paid through traditional methods. These transactions are often strong candidates for purchasing cards and virtual cards, which can reduce administrative effort while improving visibility and control. Organizations that address these challenges can strengthen oversight, reduce fraud exposure, and create a more efficient foundation for long term financial modernization.
The Hidden Costs of Checks
Although checks remain a familiar payment method, fraud is an ongoing concern. In addition, they carry hidden costs that affect both efficiency and control. Processing checks requires manual work for both the payor and the payee, which can delay payments and consume valuable staff time. Checks also provide limited payment information, making reporting, auditing, and reconciliation more difficult for finance teams.
Applying Digital Payment Solutions Effectively
When thoughtfully implemented, digital payment solutions align closely with the needs of public sector organizations. The most effective approach is not to replace one method with another universally, but to match each payment type to the most appropriate method.
- Comprehensive Payables including virtual card payments are particularly effective for invoice-based supplier payments where control, transparency, and security are priorities. Unique payment credentials, predefined spending limits, and detailed transaction reporting help strengthen controls, improve visibility, and reduce fraud risk.
- Purchasing and travel cards are effective for more decentralized or day-to-day spending. These solutions support departmental purchases, field operations, travel, and training-related expenses— while maintaining policy controls and oversight.
A segmented payment strategy helps organizations improve efficiency, increase visibility, and strengthen control over spending. In this approach, checks become the exception rather than the standard payment method.
A Real-World Example
A mid-sized government municipality organization modernized its accounts payable process by bringing payment activity onto one platform and expanding the use of ACH and virtual cards. This approach reduced manual work, simplified reconciliation, and gave the organization better visibility into its payments.
Payment processing became faster and more efficient, allowing staff to spend more time on oversight and compliance. Within the first year, the organization converted more than 60% of its spend to ACH, surpassing its adoption goal. Using fewer paper checks also reduced fraud risk, improved service for vendors, and created opportunities to earn rebate revenue. The result was a more efficient payment process that delivered meaningful financial and risk management benefits while strengthening the vendor experience.
Overcoming Barriers to Change
For most organizations, the biggest barrier to payment modernization is not technology but change management. Concerns around control, audit requirements, and vendor acceptance often slow progress. Successful organizations overcome these challenges through strong leadership, clear policies, and targeted pilot programs that demonstrate value early.
Education also plays an important role. Internal stakeholders need confidence that digital payments enhance control and transparency, while many vendors already prefer electronic payments and simply need to be engaged through a structured approach.
Measuring Success and Long-Term Value
The success of payables modernization extends beyond cost savings. Organizations gain stronger controls, better reporting, and improved audit readiness. These benefits strengthen accountability and support greater transparency. Over time, a modern payables program becomes the foundation for broader financial transformation by enabling automation and supporting system integration. The result is a more efficient, resilient, and financially sustainable operation that is better positioned to support future growth and modernization efforts.
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