Cheque-ing Out: How to Fix the Broken B2B Payments Process

It’s time to come clean and admit it: the business-to-business (B2B) payments process is broken. From shopping to socialising, nearly every aspect of our lives has been digitised, mobilised and automated. Yet when it comes to the world of business, antiquated methods of payment are still the norm. More than 60% of payments between businesses in the US – and estimates suggest as much as 85% of payments worldwide – are still made using cheques.

For buyers, that means lots of paper and inefficiencies that cost their companies billions each year. For sellers, it means little visibility into when they will actually be paid and what they are being paid for. All of this makes it difficult for treasury departments to effectively manage cash and reconcile payments. It’s a vexing problem on both sides of the equation.

However, the move is on to solve it. By automating the billing and settlement process and digitising the ‘pay’ in procure-to-pay, procurement organisations can effectively change the game.

The Cheque is in the Mail

The much-used phrase has become a classic joke, but few companies find it funny. Buyers are drowning in paper, while sellers have no idea when – or how much – they will be paid. The good news is that technology is fast emerging to address these challenges.

By leveraging the connectivity and insights of business networks and the convenience and agility of cloud-based technologies, for instance, innovative companies can connect and collaborate around B2B payments in completely new ways. In the process they can more effectively manage the entire payment cycle – from exchanging purchase orders and invoices to delivering rich remittance data along with payments that shows what they represent at the invoice and line-item level – all in a fast, secure, electronic environment.

Changing the Game

Just as ApplePay is attempting to eliminate payment risk for consumers, new solutions are emerging to achieve the same for businesses.

Innovative companies both in Europe and North America, such as Florida-based Hayden Professional Services Inc. are embracing such solutions, and experiencing the benefits they can provide first-hand. As a provider of cell tower construction services, the 10-person company relies heavily on contractors. Hayden must pay them upfront, along with any fees associated with projects such as permits and inspections. With millions of dollars often in play, visibility into the timing and amount of payments from customers is absolutely critical.

“We need to be able to see what’s pending and when money is going to be deposited in order to move forward,” says Lisa MacPherson, Hayden’s office manager. “But typically, we would just get a notification that an invoice has been paid.”

As a result, MacPherson used to spend the majority of her time trying to figure out which invoices were outstanding and why; a process that too often could take up to a year.

Chasing Growth, not Payments

All of this changed when one of Hayden’s major customer began using AribaPay, which coordinates the ordering, billing and settlement processes between buyers and sellers, and the company followed suit. MacPherson no longer has to guess when invoices will be paid, or why there could be a delay. A detailed payment schedule provides her with a clear view into the status and outlines any action that may be needed to move things along.

When an invoice has been paid, MacPherson is not only automatically notified, but receives detailed data that shows what a payment represents at the invoice and line-item level, fuelling faster, more accurate reconciliation.

The company now sees payments made within 45 to 90 days, as opposed to five to six months previously. The improvement is helping the company to fuel growth, says MacPherson,. “The time we used to spend chasing after things can now be put toward getting new projects executed.”

Agents of Change

Emerging payment technologies are certainly disruptive but disruption fuels innovation and, in turn, innovation drives advantage. Companies that ditch their manual ways in favour of automated solutions will see less paper. They will suffer less risk and put less effort into managing bank account information and related data. They will uncover and resolve disputes faster, monitor ongoing payments better and lower their processing costs and fraud risk. In the process, they can transform their business.

Change is never easy. Yet in today’s hyper-connected, global economy, where financial and supply risk are greater than ever, it isn’t an option – it’s a basic requirement for survival.


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