Getting paper out of B-to-B payments is a top priority for many organizations, with 80% reporting an ongoing effort to do so, according to the Association for Financial Professionals (AFP).
But after several years of a sharp decline in B-to-B check payments, in the last year or so the trend has begun to level off, the latest AFP data suggests. One reason for the stagnation, according to experts, is that small and midsize firms account for sizable check volume, but lack the resources and technology available to replace their paper-based processes.
Corcentric, which specializes in streamlining incoming and outgoing payment for a wide range of companies, is targeting those businesses with an offer to take over their corporate payments completely, including advancing the funds for all payments due to vendors.
Through a partnership with FIS and Comdata, McLean, Va.-based Corcentric launched an enhanced e-payments solution to assume responsibility for clients’ total volume of accounts payable and receivables, so corporations can send one lump sum to Corcentric to cover all payments due in any given cycle. Corcentric, in turn, earns revenue from rebates and discounts for making speedy payments to suppliers who are typically thirsty for liquidity and willing to provide incentives.
The solution puts Corcentric into the emerging area of supply-chain financing, according to Matt Clark, the company’s chief operating officer.
“Most payment-automation services can streamline payments for corporations, but the payments are still coming out of the company’s own bank account — whereas we’re operating like a new-age bank for vendors, paying them faster than these customers typically do,” Clark said.
Corcentric, which launched in 2002, got its start assisting companies in the defense industry with vendor payments, and though it serves a wide range of customers including large, multinational firms, Clark said it sees particular opportunity for small and midsize firms with its newest service.
Using proprietary technology to analyze the terms for paying its clients’ vendor bills, Corcentric exploits discounts available for shortening the terms on all types of payments made to its clients’ suppliers, Clark said. The company typically achieves discounts by cutting ACH payment times by up to 90 days and making other payments immediately via virtual cards. Up to 15% of Corcentric’s clients’ B-to-B payments are eligible for virtual credit card payments, Clark said.
“Our profit comes from getting a portion, or all, of the discount on early direct cash payments or virtual card payments, depending on what the spread is,” he explained.
The cost to businesses using Corcentric’s services varies based on scale, Clark said, noting that the cost is factored into savings from no longer handling payments internally, Clark said.
“Our clients and their vendors are eager for capital and looking for ways to even out their payments, so everyone typically wants to pay and get paid faster,” Clark said. “By putting ourselves in the middle of that financial flow, we eliminate the friction of funds availability on both ends.”
Because Corcentric maintains a call center and a large database of supplier payment details, every six months it queries its customers’ B-to-B connections to update and maintain current payment credentials rather than task clients with handling those updates internally.
FIS’s PayNetExchange is the backbone for Corcentric’s integrated payments solution for initiating ACH and check payments and Comdata provides the Mastercard-branded virtual credit cards for the solution. Through Corcentric’s cloud-based Web portal, its corporate customers can manage payment preferences, view payment history and check the status of payments.
As the war on checks continues,organizations that process more than 20,000 checks per month may see total transaction costs for checks of $1 million or more, Corcentric said, based on AFP data from its 2015 AFP Payments Cost Benchmarking survey.
And costs are likely higher for smaller businesses, Clark said. While the AFP’s latest data suggests organizations’ B-to-B payments are down to about 50% of all payments, Clark said the average for many of its small- and midsize businesses is about 75% checks.