Finance leaders often view payment processing costs as simply the unavoidable cost of doing business. However, the best accounts receivable (AR) tools can shave down those costs significantly. When evaluating AR software, look for the following features and capabilities that are instrumental in lowering your payment costs – whether they’re direct financial fees or indirect labor-related expenses:
- Configurable payment policies allowing you to customize rules based on a variety of different factors
- AI, machine learning, and predictive analytics to speed manual AR procedures and help monitor and foresee risks related to delayed payments and changing buyer behaviors
- Integration enabling smoother processes across ERP systems, digital lockboxes, AP portals, and more
- Interchange fee optimization capabilities enabling you to achieve lower level 2 and level 3 rates
- PCI DSS compliance capabilities freeing your team of the work and risk handling sensitive card data
Why should I try to reduce payment processing costs?
B2B suppliers that widen their payment modalities are proven to be more efficient at maximizing working capital, but research shows card processing fees in particular can erode profits by as much as 35%. Take for example, Billtrust customer Express Employment Professionals, who saved 75% by implementing thoughtful surcharging practices.
Payment processing costs will likely never go away, but you can work to control them.
For these reasons, AR teams are tasked with strategic projects to reduce their payment acceptance costs. In response, finance leaders at companies large and small typically leverage AR automation software to turn their payment costs into a lever for stronger profit margins, driving hard savings alongside productivity gains.
Let’s walk through the best AR tools that have the greatest impact on your bottom line.
How can payment policies help lower my payment processing costs?
Payment policies serve as a system of “carrots and sticks” to incentivize and discipline your buyers. They are the key element in influencing the types of payment behavior you want. Know when to accept cards, when to hit buyers with a late fee, and how to set your payment terms. A modern AR solution will offer highly flexible payment policies, letting you customize them for this exact purpose.
In fact, Billtrust customers save up to 30% on payment processing costs by using flexible payment policies to influence the right payment behaviors.
Here are some of the ways you should be able to leverage your AR automation software for real savings:
- Buyer intelligence drives policy. Data insights should expose patterns and trends in your buyers’ payment behaviors and AI-generated recommendations should guide you in ways to cut costs and reward early payments. For instance, you should see targeted offers for early payment incentives or get prompted to allow cards if it ensures faster cash flow from at-risk customers.
- Customer tiers. Suppliers and their platforms might allow a wide variety of payment options for top-tier customers and push alternative payment methods for others.
- Thresholds and rules for card payments. Sometimes, large-dollar invoices make percentage-based card fees hit harder. This is why your AR platform should help you build customized rules – perhaps only accepting cards for invoices under a certain amount. For low-margin product lines, you may want to only accept cards if a surcharge can be applied.
- Surcharging strategies. AR software should allow you to decide when and how to add a fee to card payments to cover the cost of card acceptance. Learn how to create a customer-focused surcharging program with Billtrust’s guide.
Pro tip:
Don’t just measure ROI based on the card fee. Factor in how much staff time goes into managing card payments manually, from processing payment information coming via email to all the hours spent matching and reconciling payments with their associated invoices. With AI automation and integrations, the right tools can flip the ROI in your favor. Keep reading to see how.
How can AI be used to reduce my payment processing costs?
You can use AI to reconcile payments instantly, automating cash application procedures that have long been slow, manual work. But you can also use AI’s predictive analytics to see a much bigger picture related to financial risk.
Let’s start with cash application.
Just like compliance, time spent on manual reconciliation masks the true cost of payment processing. Research shows AR teams dedicate nearly a quarter of their time to manual cash application procedures and waste time due to errors in the process – yikes!
Automated cash application solves the problem by using AI to capture, match, and apply remittance data in minutes. All those manual hours you used to put in? Gone. All that time you wish your team had to work on more strategic tasks? Freed up. Learn why machine learning and confidence-based matching are superior to legacy rules-based matching techniques.
Most finance teams still do card reconciliation by hand. What’s holding you back from automating cash application? One of our customers saw their card payments climb by 17% in a single quarter. Using Billtrust, they saved 70 hours per month in manual labor.
Predictive analytics are also helpful in foreseeing financial risk as it relates to your working capital and cash flow. It can help you cut costs by predicting and even helping you prevent unpaid invoices. For instance, you can gain visibility into:
- Which customers are slipping beyond their payment terms, exceeding stated terms
- Which customers are reducing their average order volumes
- The percentage of top buyers reducing their volume or dollar amount on their orders
- Buyers switching payment methods to credit cards regardless of your surcharging fees
- AI-generated recommendations that help you respond to or even prevent these situations in the future
Are you ready for AI? Get a free AI preparedness guide for AR professionals.
Can integration cut my payment processing costs?
Yes. As just one example, integration can reduce the amount of time it takes to monitor and manage payments, saving your internal resources. With the right data integrations to your ERP, payment gateways, clients’ AP portals, and more, you can achieve real-time payment visibility and monitor invoice payment status live from one dashboard – even if the invoice has been uploaded to your clients’ AP portals.
Every day, our experts talk to AR leaders whose teams struggle with payment visibility gaps. They spend hours trying to find answers to basic questions simply because data is scattered – most notably across their ERP system(s).
A highly connected AR platform changes that.
With ERP integrations and real-time payment visibility, everyone from collectors to customer service reps to finance leaders can instantly see when invoices are delivered, paid, or disputed without logging into multiple systems or contacting buyers. This lowers your overhead costs.
AP portals are also a costly issue.
AP portal usage is estimated to nearly quadruple in use over the next decade, but they also multiply work for AR teams. AR employees must dig through platforms to track payment status, manage never-ending logins… it’s enough to make your head spin with a few platforms, let alone dozens.
AR platform integration fixes this. At Billtrust, we have built-in integrations with 260+ AP portals, so AR teams can upload invoices automatically and monitor payment status live. Even if a customer uses a homegrown solution, we can still map to their requirements and deliver. From a single screen, you can track payment status across all your customers’ portals. Learn more about Billtrust’s AP portal integrations.
Straight-through processing is another cost driver.
One of the largest hurdles in B2B payments today is managing all of the data and reconciliation required to achieve straight-through-processing, particularly for card payments. That’s why every AR software solution should come with a digital lockbox to remove friction on both sides of the B2B payments equation.
Billtrust’s Digital Lockbox is connected so it streamlines the process by retrieving the funds and remittance data and transferring it to the supplier’s bank and ERP automatically. As an email inbox, all your emailed credit card payments are sent here for automated processing. The Digital Lockbox opens emailed payments, processes them and then captures remittance and sends it along to cash application workstreams. Learn more about payment automation tools and cash application automation.
How do I optimize my card interchange fees to qualify for lower Level 2 and 3 rates?
Card networks will reward you with lower Level 2 and Level 3 rates if you pass along extra information with each payment such as tax amounts, invoice numbers, and line-item details. The savings can add up to hundreds of thousands of dollars a year, but collecting and submitting that data manually is tedious at best and nearly impossible to manage at scale.
AR automation tools take care of this for you. Platforms like Billtrust automatically pass the right data with each payment to help you qualify for the lowest possible rates without creating extra work for your team. Clients choose Billtrust for its unmatched network of buyer data, which helps them identify whether their existing customers are already paying surcharging fees to other vendors. This, of course, helps inform their surcharging strategy.
4 reasons to accept virtual cards
Virtual cards can’t be surcharged, which has some finance leaders second guessing whether they should accept them. Here are four reasons why you should embrace them:
- Over half of CFOs now consider them non-negotiable. Card adoption is skyrocketing – especially virtual cards, which are estimated to grow +320%.
- Payments settle immediately once processed, so they have a direct, positive impact on your company’s balance sheet.
- Virtual cards make transactions more secure than checks or ACH. In today’s world of heightened security threats, many finance leaders gain peace of mind.
- They can break the sale. For some buyers, virtual cards are not a matter of preference. If suppliers don’t accept them, they’re out of the running.
PCI DSS compliance is a large part of my payment costs – how do I lower that expense?
PCI DSS compliance is a heavy lift for AR teams. Handling sensitive payment data inside your systems can get costly – fast. Payment processing services can help you offload the work of PCI DSS compliance entirely.
Manual work and complex processes inflate the true cost of payment processing. Whether it’s physical cards or virtual cards, the regulatory strain is the same: hours spent on training and audits, various IT expenses, and the constant monitoring needed to stay in compliance. Slip up, and you could be looking at fines of $5,000 to $100,000 per month.
Top-tier AR software will offload compliance responsibility and risk by keeping sensitive data outside of your environment entirely. Card data is captured securely and automatically. Sensitive details stay inside the platform’s PCI-compliant environment, and only safe, non-sensitive information flows back to your ERP (like payment status).
It’s a game-changer. In the words of one of our customers, Cintas: “We are pushing $60 million a month in credit card payments through the Billtrust platform with none of that PCI compliance touching our system – and that is a great day.”
The Cintas Story
See how Cintas went from a 16-person team manually processing credit transactions to just two people, auto-posting up to 90% of payments.
Summary: How AR Tools Reduce Payment Processing Costs
Here’s a quick overview of how the features we’ve discussed translate into direct and indirect savings.
| AR Automation Feature | How It Reduces Payment Processing Costs |
|---|---|
| Flexible Payment Policies | Incentivizes buyers to use lower-cost payment methods and allows for strategic surcharging to offset high-cost card fees. |
| AI & Predictive Analytics | Reduces labor costs by automating manual cash application and minimizes financial risk by predicting late payments and identifying at-risk customers. |
| System Integrations | Lowers overhead costs by eliminating the need for staff to log in to multiple systems (ERP, AP portals) to track payment status, saving hours of manual work. |
| Interchange Optimization | Reduces direct card processing fees by automatically submitting the enhanced data required to qualify for lower Level 2 and Level 3 interchange rates. |
| PCI DSS Compliance | Offloads the labor, IT expenses, and audit requirements of maintaining compliance, while eliminating the financial risk of fines for noncompliance. |
Why Billtrust Leads the Way
Policies, portals, compliance, reconciliation, interchange fees…every payment cost chips away at profitability. But advanced AR automation platforms automate, optimize, and streamline workflows at every step to turn payment processing into time and money saved.
Billtrust brings it all together:
- A variety of payments are accepted, helping you diversify your payment mix
- Surcharging programs enable interchange fee optimization
- Industry-leading flexibility for your payment policies
- Automated cash application and digital lockbox capabilities
- Payment visibility and centralized AR management in one dashboard
- Real-time visibility into the payment status of every invoice
- Billtrust’s Digital Lockbox makes PCI DSS compliance built in
- Predictive analytics to anticipate cash flow and optimize strategy
Start saving up to 30% on your payment processing costs. Talk to our experts to get started.
