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Four ways automated invoice payments can streamline your financial operations

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In the fast-paced business world, traditional payment methods such as checks, and wire transfers can no longer keep up with the demands of modern finance, accounting, and procurement (FA&P) functions for many organizations. Amongst the constant threat of economic headwinds, executives across multiple industries are searching for ways to improve their operating margins, using cash flow management solutions to help send and receive B2B vendor payments faster and more seamlessly.

According to PYMNTS, digitization is increasingly revolutionizing the B2B landscape with streamlined procurement processes, and even better payments workflows1. Their recent research underscores this trend, revealing that checks constitute a significant portion of business-to-business (B2B) transactions across various industries. As such, the use of digital payment methods continues to be an opportunity for organizations to optimize their financial operations, increase efficiency and reduce costs.

Despite the benefits, the expenses associated with system upgrades often act as a barrier, impeding the progress of such projects. Below are three prevalent challenges that contribute to unwarranted obstacles:

  • Lack of a unifying standard: The advent of B2B digital payments has been predicted for years yet, the Federal Reserve recently estimated that 75% of the more than 25 billion invoices exchanged each year require some form of manual processing, costing businesses approximately $200 billion every year. While some organizations have addressed the unique needs of their clients, an industry solution that can be universally adopted for achieving an all-digital future, arguably, does not exist. The B2B payments environment is filled with various, disparate technology that makes it difficult for firms to implement a single solution.  Inevitably, there are a significant number of interoperability issues that need to be addressed before serious consideration is made. 
  • Complexities of AP: A traditional B2B purchase can be in flight for over 30 days and during this time, the amount of manual processing required to complete the purchase will determine the internal cost for each invoice.  Many organizations lean on their most experienced employee to work the process to completion, but due to the operational complexities associated with this work (e.g., matching invoice to PO to delivery receipt, reviewing vendor account information and aligning on contract terms) this practice often leaves money on the table.
  • Bad data: Many AP processes result in a fair degree of human error, especially when dealing with unstructured data.  Because invoices arrive in many different formats (e.g., paper, PDF, or email) it is not conducive to automation.  Therefore, processing requires manual preparation (e.g., receive, capture, code, and route) to get the system ready.  If any step of the process is done incorrectly, it will lead to operational inefficiencies, lost productivity and unexpected cost.  

These types of challenges can distract from targeting digital payment transformation as a strategic priority, but in spite of this, Nacha reports that over 40% of surveyed organizations will very likely convert the majority of their B2B payments to digital methods within the next three years.  Here’s their rationale as to why:  

  1. Increased efficiency: Digital payment methods reduce the lag time between when a payment is made and when it is received. Companies receive payments faster, reducing the time needed for payment, freeing up their cash flow.  With digital payments, a process that used to take 10 or more days can now be automated and completed within minutes. 
  2. Lower costs: With digital payment methods, companies can reduce their costs by eliminating checks. Digital payment methods also allow for more accurate record-keeping and can reduce the need for manual reconciliation, leading to fewer errors and increased operating margins.
  3. Improved transparency: Digital payment methods provide a clear and transparent record of all transactions, making it easier for companies to track and monitor their spend. This improved transparency can also help to increase accountability, reducing the risk of fraud and other financial irregularities. 
  4. Improved security - Driving B2B Payments With Digital Mechanisms: Digital payment methods are more secure than traditional check payments, as they are protected by multiple layers of encryption and authentication processes. This helps to reduce the risk of account takeover and other types of financial crime. Today’s digital payment platforms offer security against outside threats by providing advanced identification methods; multi-factor authentication to prevent unauthorized charges and secured networks that protects all transactional data.

As vendors and consumers continue to adopt digital payments methods, FA&P operations need to pivot and embrace this movement in order to remain competitive and stay ahead of evolving market needs. With increased efficiency, improved security, lower costs, and improved transparency, digital payment methods offer a cost-effective solution for modernizing financial operations and transform it into a value driver for the firm.

Learn more by visiting our Digital Payments page, found here.

1- Driving B2B Payments With Digital Mechanisms; PYMNTS.com; April 19, 2024; https://www.pymnts.com/news/b2b-payments/2024/this-week-in-b2b-lending-innovations-ai-and-digital-payments/

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