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.
As part of determining the state of the market in B2B payments, Ardent’s analysts examine the obstacles that AP teams face in making the transition to paying suppliers electronically. In doing this, it is important to note that paper checks have retained a large portion of B2B payments, at least in North America, partly because paying via check is familiar. Practically every business professional over the age of 25 uses checks in their personal life, so the technology is easy to understand. Moreover, paper checks work “well enough” as a payment method for many suppliers, which could mean suppliers see little reason to accept new payment types. If suppliers are unable or unwilling to accept payment electronically, then paper checks will still retain a high percentage of supplier payments no matter what internal changes AP makes.
In fact, only one of the top barriers to ePayment adoption is not tied to suppliers. That barrier—lack of integration between electronic payments and accounting systems (27%)—is an obstacle because, even though ePayments run more smoothly on average than paper, if the accounting system needs to be updated manually, then there has not been much time, process, or cost savings from the transition. This makes payment automation something of a waste of time and money until the two systems are integrated. The other barriers to greater ePayment adoption are:
- Supplier does not possess technology/resources to participate (42%). The simple reality is that paper checks are still valid as a payment method, especially in North America, so a small or mid-sized supplier may not see a need to transition to a new technology. Since suppliers can receive a paper payment no matter what, investing in new technology, or hiring someone to take on new AP work, may not be a high priority.
- Difficulty convincing suppliers to accept ePayments (27%). An unequal technology footing plays a strong role in this particular barrier. Without the appropriate technology, it is hard for a supplier to see the benefits of receiving payment electronically—educating suppliers of these advantages can be a lengthy process, but it is one that both sides can leverage for mutual success in the long term.
- Obtaining and maintaining a supplier’s banking information (24%). Suppliers are understandably hesitant to share their bank account details with customers, especially in light of numerous high-profile hacks of enterprise data over the past 15 years. One of the best ways to conquer this particular issue is through using a third party that has extensive financial services experience, and the security to go along with it, as a less risky way to manage supplier account information.
- Costs borne by the supplier (23%). Costs that the supplier bears are not merely the hard costs such as money spent on a new system and so forth. There is also an opportunity cost to consider: what if the supplier spends a significant amount of capital to accept a payment for one client, and then that client, which was the only one using the new payment method, cancels their contract? The investment for that system could easily be seen as a waste. This barrier has declined since last year, however, when 46% of respondents saw it as a top stumbling block. That such a deep drop happened in only a year is a heartening sign, and could mean that suppliers are seeing more value in accepting ePayments.
Final Thoughts
Paper checks have slowly, but steadily, lost ground to ePayments. Given the visibility, accuracy, and precision of ePayments, it is easy to see why more buyers and suppliers have made the switch. The speed of business increases all the time, so it makes little sense to stay behind and watch competitors and other industry players develop and grow with AP automation. The barriers to greater adoption of ePayments are not insurmountable, but conquering these challenges will require clear and open lines of communication between the AP team and suppliers. Communicating and collaborating with suppliers will thus allow AP to address these and other barriers, resulting in greater levels of automation and more efficiency in the long term.
Download Ardent’s “State of B2B Payments 2015” report now and learn more about the barriers in the way of greater ePayment adoption, as well as getting a picture of the payment industry today.
Check out these related articles for more:
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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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