Cutting out the paper chase is not enough.
In the B2B realm, paper checks are still stubbornly entrenched in the payments landscape.
Up to 24% of B2B transactions are made with checks – and that’s coming from the largest companies, with over $1 billion in revenue. About 50% of all B2B payments are made by check.
But the B2B modernization movement must go well beyond the limits of eliminating paper payments (although this is indeed a major trend). True Modernizing payments in B2B requires a holistic approach to workflows and interactions between buyers and suppliers – and ultimately a spirit of collaboration that optimizes Accounts Payable (AP) and Accounts Receivable (AR) .
PYMNTS’ own data, trackers and reports point to the lack of effectiveness. More than two-thirds of companies generating between $100 million and $500 million in annual sales have had their payments delayed. And 80% of companies with annual sales of $25 million to $100 million lack the resources to digitize their AR and AP systems. This inefficiency has major implications, given that B2B payments are estimated at $1 trillion annually.
Unsurprisingly, several trends are converging to propel B2B transactions more fully into the digital age. The benefits are tangible, as more than 60% of businesses said AP/AR digitization has helped them reduce costs.
Read more: 62% of companies say AR, AP scanning has helped reduce costs
Focus on digital optimization
Increasingly, banks are implementing and offering their corporate customers ways to streamline cash and cash flow management. A PYMNTS study found that 31% of corporate bank customers cite lack of payment options as a significant issue for their organizations.
About half of banks are investing in application programming interfaces (APIs), which in turn can help automate processes that have been manual in nature for decades. The Banking-as-a-Service (BaaS) offering gives business customers a plug-and-play approach to solving at least some of the operational inefficiencies that exist across the enterprise. In one notable statistic, up to 73% of wholesale organizations have used automated clearinghouse (ACH) payments.
See more : APIs to Drive Banking-as-a-Service Growth in 2022
Education is necessary
But investment cannot take place – certainly not from the companies themselves – without knowledge of what is on offer to improve processes and how new technologies can be exploited.
Thus, education is vital. PYMNTS noted that 3% of chief financial officers (CFOs) said digitizing AP and AR operations would “introduce payment options that weren’t available before.”
Read more: Businesses lack knowledge about modernized payments choices and developments
Getting there is another story, but as vendors continue to reach out to enterprise customers, they are helping to steer the great digital shift.
Virtual cards are in the cards – so are pre-approvals
Upgrading real exchanges between buyers and suppliers can go through virtual cards, supplementing plastic cards where necessary.
Dan DeVall, vice president of business development at Airbase, told PYMNTS that 80% of buyer-supplier transactions could be done electronically by 2025.
See more : Virtual cards are becoming the Swiss army knife of expense management in a work-from-home world
But B2B transactions themselves have become commoditized, and the adoption of electronic payments must come with something more compelling than reducing transaction cost itself.
Corporate cards, especially virtual corporate cards, give employees the right tools to buy what they need to do their jobs — just when those expenses become critical, DeVall said.
For the employees themselves – those in the field, so to speak – pre-approvals across platforms (with the benefit of expense management software) are essential.
While integrated software and payments are becoming the norm in B2C, the practice is spilling over into B2B.
PYMNTS data revealed that 42% of companies surveyed reported a lack of supplier portals – typically third-party platforms that allow them to connect online with their suppliers or vendors – as a pain point in their B2B payment processes. , with 15% citing this gap as the biggest frustration they faced. Implementing integrated finance could allow companies to offer their suppliers easier access to digital payments.
Read more: How Integrated Finance Can Help Businesses Streamline Their B2B Payment Processes and Stay Competitive