The initial data from Bottomline’s annual B2B Payments Survey is in. As a co-venture with Strategic Treasurer, this 6th version rounds up over 800 finance leaders from both banks and non-financial service companies across the globe.
Hopefully you signed up for our September 13 webinar to get a complete picture of the data, but we did want to give you a sneak peek at one of the topline data points from the 2022 survey. It’s one that which could portend significant changes in the 2022 survey, and by extension, significant change for businesses.
On challenges, 2022 versus now
When we asked for the top AP challenges, our respondents tagged timely invoice approval (42%) as their top concern and updating bank account details (38%) as their second issue.
The timeliness issue was identified by small firms (45%) more than large (31%); updating bank account details identified by large firms (58%) more than small (31%). This makes sense with small firms more likely to see cashflow issues that could be mitigated by timely invoice approvals.
The real story, though, is revealed when comparing these results to the 2021 survey. Last year the top challenge was updating bank account details (49% in 2021 vs 38%) followed by missing vendor info (a concern that did not emerge in 2022) and timely invoice approval to meet standard payment terms. (38% for 2021 vs 42%).
We will have to wait to interpret this data in the context of the rest of the report. But that “flipped script” between invoice approval and updating bank accounts most likely speaks to the priority now placed on cashflow above all else. It is an underrated feature of invoice automation, which enables companies to streamline workflows, leverage early payment discounts and get operational visibility around PO and non-PO invoice processing all by integrating with the ERP.
The results are also consistent with Botttomline’s other keystone research project, the 2022 Business Payments Barometer. The study surveyed 1,600 companies from the U.S. and Great Britain. Both regions reported a need to get cash in the door as quickly as possible. Regardless of size, around 73% of all US companies surveyed say that receiving money quickly has never been more important. Timing is everything, as the saying goes, and that’s where AP automation checks in.
Automation as a solution
Among other things, the very digital nature of AP automation supports controls around payment timing. For suppliers, it’s welcome news that it eliminates the “the check is in the mail” language of manual days. For example, virtual cards let companies send payment with a trackable notification, meaning that paying businesses can keep control of their cash right up until the point of the payment, while still making payments more quickly if desired. In this way, AP automation enables cash flow management.
While inflation and recovery from the pandemic are primary causes of many current cash flow and working capital issues, payment terms can also influence cashflow. Barometer results also showed that companies are holding on to their cash longer, right up to the point of paying vendors late. In fact, only 16% of US businesses said they have never made a late payment. Seventy-six percent said they would negotiate payment terms to protect cashflow. That brings us to the receivables side of cashflow.
There’s a perception that automating AR as well as AP makes negotiating payment terms more difficult, because the system lacks the flexibility of an automated approach. That’s not true. With an automated system it should be easier to set favorable terms. If this is a sticking point for payers, we have seen an automated approach enhance arrangements for new payment terms, especially if economic issues have made it tougher to keep their old deadlines. It easily allows you to project the concessions you can make and the deadlines that can’t move without long meetings and vague commitments to new schedules. Automation, even with AP and AR, can accommodate a reset.
AP and AR integration are becoming agile solutions for banks and non-financial service companies. In 2021, 51% of our respondents said they didn’t receive payments according to terms; another 46% received unusable remittance information. Automation can go a long way toward fixing both problems, and it’s clearly becoming a necessity for businesses to do so.
If you’re intrigued by this sneak peek, again, do go back and check out our September 13 webinar.