From a technology adoption perspective, AP leaders for much of the past two decades tended to more often than not focus on how invoices were received, processed, validated, and approved than how they were paid. However, over the last couple of years this mode of thinking has started to change. More recently, the ramifications of the COVID-19 pandemic has increased attention on cash management, and therefore, on the vendor or B2B payments side. Ardent’s 2020 State of ePayables market research has discovered that 53% of businesses planned to alter how and when suppliers are paid as a result of these difficult times. For most, but not all, this meant a need to extend payment terms. Several larger, prominent, corporations actually changed their previous payment strategies and started paying suppliers faster to help ensure their solvency and ability to stay in business in order to maintain the resiliency of their own supply chains. More generally, this response signals that many CFOs, treasurers, and other finance leaders are rethinking not only how to manage and execute payments, but also how they can impact suppliers’ financial well-being. Thinking about AP and an AP-managed process is something that can be both exciting and daunting.
The restrictions put in place because of the pandemic have had far-reaching implications for most enterprise functions. For AP, it was not simply a matter of losing facetime and having to contend with delays in processing invoices, as similar challenges existed for payments, as well. In both cases, the higher the volume of paper and manual work was exacerbated by an inability to work in the office. This has led to more enterprises including payments in the scope of their AP transformation projects.
Addressing supplier payments is not a task without problems, however. As highlighted in the figure below, there are several challenges that businesses face in enhancing how B2B payments are managed and executed.
Top Challenges Related to B2B Payments
Manual- and paper-based processes are often the direct cause of a delay in approval for both invoices and payments. It is time- consuming for AP staff to physically shuffle invoices for approval across the office, chase down slow approvers, and then wait for the green light to schedule payments. Further compounding this issue is if payment management relies on outdated processes; a high volume of paper-based checks can serve as a reminder of the relative inability of some AP functions to quickly, efficiently, and cost effectively get payments out the door. Similarly, managing vendor payment and banking details in a manual fashion can be time-consuming, error-prone, difficult to keep current, and can delay payments to suppliers if the AP staff must confirm details and enter them manually into an ERP, financial system or, worse still, a spreadsheet, before they can be processed. All of these issues and potential for disruptions have only be exacerbated by the ‘work from home’ mandates that many are still experiencing. Manual- and paper-based payment processes, as with the invoice processing component of the AP function, are more costly and prevent (or make it extremely difficult to leverage) key data from being analyzed and used for accurate, real-time financial decision-making and intelligence. Additionally, the “payment” component is also at high risk of fraudulent and non-compliant payment activity, even more so for organizations that are not automated.
The focus on B2B payments is greater than it has ever been. Not only is it clearly on the radar of more and more enterprises due to the pandemic but AP, P2P, and FinTech solution providers are investing more time and resources than at any point in the past to help address the needs and wants of the market. If you are interested in learning more about the B2B payments space, please download Ardent Partners’ recently released 2020 B2B Payments Technology Landscape.
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