Every year, Ardent Partners publishes several benchmark studies into the accounts payable (“AP”) marketplace. One of those is the annual research effort into the state of business-to-business (“B2B”) payments, called “The State of B2B Payments 2015: Emerging Business Value” this year, which Ardent is proud to announce is now available. The report captures the perspectives, experience, and accomplishments of more than 200 AP and finance leaders, as well as examining the trends affecting the marketplace and offering recommendations for improvement. The full report is available for download here.
When a supplier receives a payment, it is incumbent upon accounts receivable (“AR”) staff to quickly and accurately reconcile that payment with orders, contracts, and general financial information. AR does this through remittance information relevant to the payment; without this data, the AR team cannot quickly reconcile the payment and must search through its own data to potentially find the correct order or orders to reconcile the payment against. And, even if AR does find this information, there is no guarantee they would have found the correct order or even would have found all the data they need.
Why Remittance Information Matters
Remittance information answers a series of key questions that AR needs to know before reconciling payment, including who the payment is from, what the payment is for, whether the amount is correct or not, etc. Paper checks have been able to provide pages upon pages of remittance information, side-by-side with the payment, for decades. This ability to provide detailed remittance information at the same time as payment has made it very attractive for suppliers to keep being paid in paper checks despite the rise in electronic payments.
Electronic payment methods, on the other hand, did not always provide that much detail in the remittance arena. Automated Clearing House (“ACH”) payments, for example, historically showed only 94 characters of remittance data. In the case of commercial cards, many of them do not provide significant line-item detail unless the card offers what is called “Level 3” data, which may not happen depending on which card issuer an enterprise uses.
Without clear remittance information, reconciling payments can take much longer for supplier AR teams to complete and more opportunities for mistakes are created. Because of this importance of remittance information to AR teams, in fact, many suppliers have eschewed ePayments until recently, when emerging technologies such as business networks and other network-based payment solutions made it easier for detailed remittance information to be provided alongside the ePayment. This has contributed to greater ePayment adoption, along with enterprise supplier enablement programs that have convinced suppliers of the value of being paid electronically.
A lack of standardized remittance information is not the only reason suppliers have resisted being paid electronically, but it is an important one to understand. Given the realities of how suppliers use remittance information, and the consequences of receiving inaccurate or even no data, it is understandable that suppliers would default to the payment method most likely to provide them with the rich detail they need—paper checks. This paradigm is changing, however, and as a result more suppliers are willing to accept payment electronically than ever before.
Final Thoughts
Remittance information is vitally important for the AR team tasked with reconciling payments. Without the answers that remittance data provides, reconciling a payment can take much longer and may not even be accurately completed. As a result, providing rich, standardized remittance information can be a critical step to driving supplier acceptance of ePayment methods. New technologies, such as network-based payment solutions, are making this happen in the marketplace, which means there could very well come a day where paper checks no longer provide more remittance data than ePayments—yet one more step on the road to ePayments becoming the default method.
Download “The State of B2B Payments 2015: Emerging Business Value” today and find out more about the value of remittance information in ePayments adoption.
Check out these related articles for more:
B2B Payments 2015: AP’s Top Benefits – Increased Accuracy
B2B Payments 2015: AP’s Top ePayment Benefits — Cost Savings
B2B Payments 2015: AP’s Top ePayment Benefits — Efficient Processing
B2B Payments 2015: Why Supplier Enablement Programs Matter
B2B Payments 2015: The Top Barriers to ePayment Adoption
B2B Payments 2015: How Can Treasury Benefit from Electronic Payments?
B2B Payments 2015: How do ePayments Impact DPO?
B2B Payments 2015: The Top 3 Payment Challenges Facing Accounts Payable
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Ardent’s Chief Research Officer Discusses New “State of B2B Payments 2015” Report (Video)
B2B Payments 2015: The Emerging Business Value of Electronic Payments
Ardent’s “The State of B2B Payments 2015: Emerging Business Value” is Now Available
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