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.
One of the key themes in the report, as in many of Ardent’s other publications, is that of supplier enablement. This should not come as a surprise to anyone who has worked in AP (or procurement) for any significant length of time. Suppliers are key stakeholders to many a business process transformation, especially in regards to invoicing, as suppliers experience the most direct impact besides AP. If suppliers are unable—or unwilling—to change, then there is little point to altering internal workflows. The reason? AP will end up not achieving ROI if suppliers refuse to make the necessary changes.
Suppliers Drive ePayment Adoption
Electronic payment methods are not new. Wire transfers, for example, have existed since the late 1800s, while commercial credit cards have been in use since the 1930s, and Automated Clearing House (“ACH”) payments started in the 1970s. In other words, these are mature solutions that have been in operation for years and remain accessible for enterprises of all sizes. Given this reality, it is easy to wonder why more enterprises have not tried to shift a greater percentage of their supplier payments to electronic methods.
To be quite frank, the problem is a combination of enterprise inertia and supplier reticence. Supplier hesitation about ePayments is, from a historical perspective, completely understandable. For ACH payments to work, suppliers must share their bank account information with clients (depending on bank, this may be true with wire transfers as well). If a supplier accepts a commercial card for payment, they must pay an interchange fee—a percentage of the amount—and forgo that percentage of payment.
These are not the only changes that a supplier must make to accept an electronic payment, but in some cases these are enough to make a supplier hesitate. Paper checks, on the other hand, are comparatively easy to accept. Buyers fill in the payee name, add the amount, sign the check, and mail it off. As many business professionals over the age of 30 in the developed world follow this same procedure in their private lives, paper checks are very safe from a familiarity perspective. As such, many suppliers may not see a reason to make a change.
This reality means that the adoption of ePayments has stagnated. So long as suppliers hesitate, buying organizations will resist transitioning to ePayments … no matter the advantages. However, Ardent’s 2015 B2B payments study shows that times are changing; fully 52% of suppliers are now willing to accept ePayments—the highest percentage Ardent has seen in the more than 10 years its analysts have conducted AP-focused research. This could mark a tipping point for ePayment adoption, but only if enough enterprises pay attention to supplier enablement.
The Importance of Supplier Enablement Programs
A willingness to accept ePayments is a good first step, but willingness does not automatically translate into getting paid electronically. Part and parcel of automating supplier payments is a well thought-out supplier enablement program, which can determine whether a payment automation project succeeds or not. Bear in mind that four of the top five obstacles to ePayment adoption are supplier related, so keeping suppliers happy is of paramount importance when switching to electronic payments.
Suppliers that have historically accepted only paper checks may not know about the benefits they can accrue from accepting ePayments. These advantages include greater visibility into payment status, improved remittance information, and efficient payment reconciliation—all of which can help save suppliers time and money in the long run. Buyers that take the time to actually communicate with their suppliers about these benefits, which is part of a supplier enablement program, actually end up more likely to make a successful switch to ePayments.
Organizations that do not regularly communicate with their suppliers, however, may find that their payment automation project ends up failing to achieve a successful ROI. After all, what good is the capability to pay a supplier electronically if a majority of the supplier base only accepts paper checks?
Final Thoughts
An effective supplier enablement program is critical to the success of a payment automation project. If an enterprise does not get enough suppliers to accept ePayments, then the enterprise will not maximize return on investment in the long term. Using a supplier enablement program and regularly communicating with the supplier base, however, ends up being the recipe for success. Suppliers end up happy, the AP team ends up happy, and everyone receives data that makes their lives easier.
Check out these related articles:
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
B2B Payments 2015: The Importance of Payment Visibility
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
