Provider Payments: 3 Reasons to Think About a Separate System

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If you’ve seen the recent software comparison chart from the National CACFP Sponsors Association, you may have noticed that My Food Program doesn’t have a provider payment system. Did we forget to build that feature? Just run out of development resources? NOPE! We did that on purpose. We will give you three excellent reasons to consider using My Food Program for CACFP recordkeeping while using our recommended external vendor for provider payments.

Reason #1: Prices!
You know the old saying, “Don’t re-invent the wheel.” We took a look around at available software to create ACH/NACHA files and we felt building a payment system into our software would be re-inventing the wheel. Years ago, making ACH payments was challenging and required intimate knowledge of how the banking systems worked. At that time, it made absolute sense to include this in your CACFP software. But when My Food Program was launched as a fresh take on CACFP recordkeeping, there were easy, affordable options available to solve this problem.

Bottom line: if we had developed a provider payment system within My Food Program, our prices would be higher and we didn’t want to do that to our valued customers when they could process provider payments using a separate system.
 
Reason #2: Avoid Being Trapped
There’s another consideration to think about: should your CACFP and payment functions even be integrated? Many of the sponsors that have contacted us are looking for a “one-to-one” replacement of their existing CACFP software, which includes a provider payment system. In the chaos of surprise price hikes, the question of whether it makes sense to integrate these at all is getting lost. Sponsors may consider de-coupling their CACFP software from their ACH software for making payments to their providers.

Why?

Well, the same reason you are shopping around for CACFP software right now. You likely were painted into a corner by surprise price hikes from your existing software company. Are you sure you want to move to a new corner where you are likely to be painted in again? If you de-couple your CACFP from your ACH software, you are able to change either, or both, at will. This means you don’t go from being stuck in one corner to being stuck in a different one.
 
Reason #3: No More Accounting Adjustments
Let’s talk about accounting. If you use a claim estimate from any CACFP software, you’re going to get a *slightly* different number than what the state agency calculates. We’ve dug into this and found that different state agency systems round up or down or use a different number of digits to calculate claim reimbursement. The end result is that there is always a small difference between what any CACFP system calculates and your state agency says the reimbursement is. This has been handled by your CACFP software making an estimate which always had some small math error, then “truing up” after with the actuals from your state agency. If you de-couple your CACFP from your ACH, you can use the state agency output file to create payments. It will always match then and an entire step in your reimbursement process can be eliminated.

So How Should We Pay Our Providers?
Our first recommendation is to look at the functionality of your accounting software. Many of the popular platforms allow you to set up your providers as vendors and designate them as using direct deposit or paper checks for payment. After you have entered your provider’s claim into your state agency system, download the appropriate report and import it into your accounting system.

If your accounting system doesn’t have payment functionality, there are several external software programs that will also do the trick. Our favorite is Treasury Software because it will link directly to your bank and uses a simple copy/paste method to generate the ACH/NACHA file that you can import into your bank. It’s also really affordable! They also charge a flat $20/month ($240/year total) instead of a per-transaction fee.

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