B2B payments need to play catch-up

Register now

Digital technology has transformed our everyday lives, allowing us to pay bills, order takeout, shop online and do hundreds of other tasks in mere seconds.

Much of this couldn’t have happened without digital technology providers radically changing how businesses themselves operate. The B2B world has benefited immensely from powerful analytics and precise forecasting, with advances such as 5G and IoT poised to create even greater operational efficiencies.

But one area where the B2B landscape is still lagging: payments. The failure to bring decades-old processes into the digital era not only continues to cost companies dearly but has become increasingly disruptive in the current COVID-19 environment. With business closures and employees forced to work from remote locations, companies still stuck in a manual and paper environment are under pressure to find solutions that automate their payment processes to meet today’s business conditions.

Companies that are part of supply chains must also find a way to inject cash flow to keep operations afloat. We are seeing an increase in B2B purchases on card because a credit card is a great way to access on-demand credit. In times of a cash crunch, the credit card becomes a critical component on both sides of the B2B equation: a source of working capital for buyers and vital cash flow for suppliers.

Even before the pandemic, two powerful forces made a digital-focused strategy for payments to optimize operations and cash management almost inevitable.

First, the payment ecosystem itself has grown more complex. Accounts payable and accounts receivable are increasingly complicated by practices and systems that vary from customer to customer. The lack of interconnectivity delays the transfer of funds and payments data leaving suppliers with late payments and without the necessary data to reconcile unapplied cash.

Second, globalization compounds these challenges. The days of businesses sharing a neighborhood with their vendors and customers have long passed. Suppliers and buyers today are scattered across the world. Businesses must stay connected with their entire supply chain.

The advantages of modernizing payments serve all payment stakeholders – the providers of payment capabilities and the businesses they serve. Providers that offer better experiences for B2B payments will see a gain in share and generate the critical data needed to deliver additional services. Businesses that adopt new payment capabilities will be able to quickly adjust to changing conditions, optimize working capital, and improve cash flow to ultimately reduce financial risks.

This innovation needs to be done against a backdrop of disparate processes, systems and networks that manage the payment processes today. An open-loop network that unifies these systems for all payment types will enable greater control and richer data capture to optimize B2B transactions across the board.

Today’s dated B2B payment landscape compromises cash flow and burns through valuable time and human resources in countless businesses. But with targeted upgrades to the digitization and standardization of the payment value chain, companies can now deliver dramatic benefits that mirror the impact of the operational digitization that is now deemed essential.

For reprint and licensing requests for this article, click here.
B-to-B payments Digital payments Payment processing Checking Mobile payments Coronavirus