The cloud revolution is just the start for B2B payments

Blog | March 11, 2021

Reading time: 4 min

By Vice President of Integrated Payments, Billtrust

With Covid-19 pushing a greater need for digitization and fintech’s globalization inciting interest outside B2C, it’s fair to say that the B2B payments industry experienced significant changes last year which, in many cases, enabled businesses to survive the fallout of the pandemic.

For example, the adoption of cloud-based payment channels allowed suppliers to avoid the substantial cash flow lags that occurred because of USPS slowdowns and the resulting late delivery of paper checks. But other benefits moved beyond the “mail time” and into the processing itself: Digital payment types offered organizations the promise of embedded digital remittance, lower costs and faster processing times.

Now, that the first months of 2021 have passed, it’s clear that B2B payments are set for even more innovation. After all, this mass shift to remote work has significantly blurred the lines between workers’ personal and professional lives. And for those in the role of "business buyer," their expectations are advancing along a similar path as their expectations as consumers.

So, as digitization establishes new standards for fast and seamless experiences in the B2B world, payments are set to follow suit.

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Businesses have been migrating to digital payments

The decision to migrate to digital payments has been a saving grace for many businesses. Studies have shown that the paper check’s decline has been underway for some time. In fact, research conducted by the Association of Financial Professionals in 2016 found that 51% of B2B payments were paid by check. By 2019, that number had declined to 42% -- and this was before the pandemic and other events such as the USPS’ slowdown further illuminated the dangers of being so heavily reliant on paper. Operating in a low cash flow environment reminiscent of 2008, payment delays have caused significant negative consequences to their days sales outstanding (DSO), which when grouped with Covid’s impact on supply chains, has threatened their overall ability to survive.

While checks may never completely disappear, the pandemic has forced companies to look at how operations can be digitized and automated. As more buyers find payments have been lost in the mail or delayed to the point that their credit lines are not replenished or they cannot reconcile their books at month end due to uncashed checks, teams will continue to say goodbye to stale processes and adopt processes that get cash through the door quicker.

AR automation is becoming commonplace

Recent research from Atradius suggests that 43% of invoices across the U.S., Mexico, and Canada are unpaid by their due date -- which is a 25% increase from this time last year -- and this will be vital for their pandemic recovery.

In addition to the aforementioned market challenges brought on by COVID-19, 2020 was an incredibly tough year for teams tasked with maintaining the financial health of their organizations while working remotely. Their workloads multiplied and resources thinned, both of which amplified the need for automated technologies that allowed them to do more with less. A recent study of small to large businesses found that 70% say they’re planning to automate their AR processes. Yet, much of the talk around machine learning and AI to date has been just that — talk.

However, in 2021 we’re seeing these technologies becoming commonplace as a seamless B2B payments experience becomes more critical -- and organizations themselves seek solutions with proven ROI. Which is why we’ll see an increase in adoption of automated tech that enables brands to reduce the costs associated with payment processing, increase cash flow through faster payments, improve operational efficiency, and enhance the overall customer experience.

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Impacting DSO and bottom lines

Of course, what all of these benefits have is an impact on DSO and thus, companies’ bottom lines, which have taken substantial hits since the start of the pandemic. Which is why a Deloitte report examining the impact of the crisis on cash flow management listed the expedition of receivables as a key component of organizations’ overall business risk and continuity plans. It’s vital to improve the rigor of your collections processes, they say, and focus on getting the basics right such as timely and accurate invoicing. Failure to do so can lead to costly delays in receiving payments.

Meanwhile, APQC found that businesses that invoice 80% or more of their invoice lines electronically or automatically have a significantly lower DSO (30 days) than those that send 20% of their invoices this way (55 days). With access to capital as tight as it's been since the 2008 market meltdown, automation could prove pivotal for B2B’s not only looking to rebound in 2021, but scale their operations.