E-Payments: Why a Holistic Approach Wins Out
It’s no secret that when it comes to payments, speed is often the name of the game. However, with increased speed often comes decreased accuracy. From sourcing to invoicing to payment processing, B2B transactions involve a lot of steps that can muddle payment precision and ultimately hurt a company’s bottom line.
Checks Still Win
While finance executives are expected to take a more proactive role when it comes to financial strategy, outdated processes often stand in the way of success. This is especially true for B2B payments. Despite the many technological innovations created to improve business processes, over 74 percent of companies are still issuing paper checks. This outdated practice is costing businesses heavily, especially when individual transaction fees are tallied. For example, organizations that process in excess of 20,000 checks per month may see total transaction costs for checks around $1M per year, according to the 2015 AFP Payments Cost Benchmarking Survey.
The number and variety of electronic payment options available for businesses are beginning to grow in sophistication, giving companies the chance to take charge of cash flow control at unprecedented levels. So why is the adoption rate still so low? While transitioning to electronic payments and card options may seem like the best option at the surface, executives must consider how their suppliers would prefer to be paid.
Payment Flexibility is Key
In fact, it is often the suppliers that dictate payment trends for the whole supply chain. In the 2016 Electronic Payments Survey examining corporate payment trends, it was found that 51 percent of survey respondents use paper checks as their main form of payment. This still leaves 49 percent of respondents who prefer to be paid through a different medium.
As it is unlikely that one payment solution could become so popular that it would render all others moot, buyers must be flexible to the needs of their vendors. B2B payment solutions should be holistic and support multiple payment options, such as virtual cards, checks or ACH, in order to accommodate a wide range of suppliers.
Best of Both Worlds
With a holistic, inclusive approach to payment technologies, transparency into the payment processes is imperative to a business’s success and security. More visibility into supplier payments will enable accounts payable to design a more detailed cash management strategy.
The ability for payment technologies to boost corporate cash management by adding visibility into their cash positions can help finance executives beyond individual transactions alone. Information as basic as buyers knowing their payment has been received by their supplier, and suppliers knowing a payment is headed their way, means far greater control of finances throughout the entire source-to-pay process.
Going One Step Further
Streamlining source-to-pay yields benefits that go beyond payment efficiency. Automation is key for both data visibility, accuracy and speed for the entire Accounts Payable department. Manual payment processes and multiple human touches per invoice decelerate the speed at which transactions are approved. Multiply this by the number of transactions each department handles in a given month and the lag will be reflected in the end-of-year earnings. This also trickles into executives’ ability to manage cash flow, decreases discount capture, and can adversely affect relationships with suppliers.
By automating the full lifecycle of a transaction, including the elusive payments portion, organizations can have greater visibility into spend and dramatically reduce costs. The key to lucrative adoption of holistic, automated payment processes lies in introducing a system that is open, scalable and flexible, something that can accommodate existing data and integrate all new data as well.