Editor’s Note: Ardent Partners recently published our annual AP-themed report, The State of ePayables 2018: The Future of AP is Now. Today’s article is part of an on-going series focused on the report’s key findings. If you would like to get the full report, it is available for download here (registration required).
With the recent publishing of Ardent Partners’ 2018 State of ePayables research report, and taking briefings from payment providers, I have been spending a good deal of time examining B2B payments. Some have called B2B payments the final frontier of AP automation because up until the last couple of years it had received the least amount of attention from solution providers and practitioners in the P2P space. Paper-based payments worked fine once upon a time, but just as new technologies have removed other legacy business processes (the paper invoice, the fax machine, the rolodex, etc.), new ePayment solutions and processes from companies like AvidXchange, Nvoicepay, Finexio, and Comdata, have made it strikingly less economical and efficient to pay suppliers with paper checks.
Jim Morrison, American singer-songwriter, and poet, best remembered as the lead vocalist of the Doors, once said “The future is uncertain, but the end is always near.” The death of the paper check has been talked about for years and yet, ‘its’ end’ does not seem to be as ‘near’ as many of us would logically expect.
In a world where the speed of business increases moment by moment, and your next competitor is right around the corner, organizations cannot afford to let business value slip through their fingers. This is, however, what many AP organizations have done by allowing manual, paper-based methods to persist in their supplier payment operation. Paper checks may have functioned “well enough” in the past, but ePayment solutions make too much sense in this day and age to ignore them. While there has traditionally been a greater focus for AP departments automating the front end of the process, more and more organizations are realizing that ePayment solutions are vital to realizing the full potential of AP and P2P automation.
Ardent Partners research has consistently shown through the years that manual, paper-based processes are inefficient and cost significantly more than electronic payments. Our most recent data from the State of ePayables 2018 report showed that it cost, on average, $10.09 to process a single supplier payment. Whereas the cost to process a supplier payment electronically typically costs less than $2.
All over the news today we hear about Artificial Intelligence (AI), Robotic Process Automation (RPA), crypto (digital) currencies, and these are definitely having an impact on the way people view payments within their organizations. More than ever, there is an expectation of less paper in the process should mean that more organizations will experience cost and process savings in the near future. Payments are the most manual, labor intensive part of the AP process that has yet to receive wholesale automation. And, while progress is being made, the progress has been slow. Data from our State of ePayables research showed that 59% of B2B payments are now made electronically. While this is a marked improvement from only 5 years ago, it is still a long way from where we should expect it to be in this day and age. If, for a moment, you think about your own personal finances, how many of you are paying over 40% of your bills at home with paper checks? How many of you are paying even 10% of your personal bills and invoices with a paper check? My guess is that most of you haven’t written a paper check in quite some time.
Conclusion
It is easy enough to justify moving away from paper checks simply on a time and cost savings basis, but ePayments also result in far fewer payment inquiries from suppliers, provide organizations with the opportunity to generate cash rebates from the use of virtual cards, offer a greatly improved audit trail, as well as enable organizations to improve the management of their cash flow, and taking advantage of numerous supply chain finance opportunities that exist. There is significant business value hidden in every B2B payment that an enterprise makes, and with the recent developments and innovations in the market, combined with an increased recognition of the emerging business value of ePayments, enterprises need to continue to look at these new ways to drive financial value.
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