Accelerating Digitization in AP and AR

"The COVID-19 crisis has accelerated many trends that were already underway before the crisis began—and the area of B2B payments is no different." - Tom Dolan, General Manager, Paymode-X Business Solutions

"This is an opportunity for organizations to implement an AP automation solution—to create a payment strategy that reduces processing costs, improves the security of payments and improves cash flow" - Jeff Feuerstein, SVP, Product Management and Market Strategy, Paymode-X Business Solutions

“The COVID-19 crisis has accelerated many trends that were already underway before the crisis began, from the growth of ecommerce to the rise of streaming entertainment,” says Tom Dolan. “We see those trends accelerating across the world—and the area of B2B payments is no different.”

Historically, inertia has been a considerable barrier for organizations when it comes to modernizing their B2B payments. But while this may still be an obstacle, the changes brought by the pandemic have helped to sharpen companies’ focus on the need for change.

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Inefficiencies and risks

While outdated payment methods such as checks continue to be used widely by businesses, the crisis has highlighted the inefficiencies and risks associated with these methods. For one thing, the shift to remote working arrangements has led to a greater need for process improvement and automation.

“It’s just not as easy to walk down the hall to get approval for something, whether that’s a check payment, processing an invoice or resolving an issue,” says Dolan. “So there’s a big push to drive automation—which is prompting a lot of customers to focus on payments as an area where they can improve efficiency.”

Where risk is concerned, companies that had inadequate payments processes in place beforehand have seen these shortcomings exposed by the pandemic, leaving them at risk of being targeted by fraudsters. What’s more, the shift to home working has led some companies to adopt workarounds that may result in additional vulnerabilities.

“We’ve talked to businesses that have had some unusual situations—such as having staff printing checks from home and running to the office to pick up critical documents,” says Dolan. “Some might have a shift system, with people going to the office twice a week and leaving a signed check so the next person can add their signature. Or they might be putting high-value checks in regular mailboxes.”

Accelerating adoption

Against this backdrop, companies are accelerating their efforts to eliminate checks and automate payments, with many embarking on AP transformation programs. Security is one important area of focus: digital payment methods can improve security by removing the risk of check fraud and automating insecure processes.

At the same time, economic uncertainty is prompting many organizations to focus on goals such as reducing costs, improving cash flow and capturing any early payment discounts that may be on offer from suppliers.

The pandemic has also exponentially accelerated the move to SaaS applications, says Dolan. “When we talk about the payments world, there are many different systems, including invoice acceptance, ERP systems, payments processing and workflows, and cash management and receivables systems,” he says. “With all these systems, there’s a great drive to integration right now—and how and where the data resides is part of that.”

Both sides of the equation

While accounts payable is one area that is ripe for improvement, accounts receivable is also coming under scrutiny. “Organizations are also looking to improve the way that they receive payments by moving to digital acceptance,” explains Feuerstein. “There are benefits for both payers and suppliers to have better visibility and improved processes—and the whole ecosystem is seeing the benefits of this automation.”

Likewise, the opportunity to improve relationships with vendors and partners is another reason to adopt automated payments solutions. A digital payments initiative will typically give those counterparties greater visibility into when they will be paid, alongside more detailed remittance information and the ability to integrate data into their back-end systems more readily.

“Looking at an automated AP solution, we’re getting customers to realize it’s not just about processing payments, but about having a payment strategy that looks at who you are paying, what you are paying them and what data you need to provide to your suppliers,” says Feuerstein.

Here to stay?

The crisis may be driving companies to review their processes—but will these changes ‘stick’ if and when the pandemic subsides?

Feuerstein comments that what is currently taking place is an acceleration of trends that were already happening—and as such, progress is likely to continue. “If I’m a CFO in healthcare, for example, I was probably already looking at how to automate my accounts payable,” he adds.

In addition, some markets are embracing regulatory reforms that will help to further the adoption of electronic payment and electronic invoicing. Beyond the crisis, these macro factors are likely to continue furthering the drive to increase visibility and improve relationships between businesses.

Most importantly, digitizing payments helps you improve vendor relationships, informed and supported by the richer data streams that process evolution creates.

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