5 Factors to Consider While Developing a B2B E-Payments Strategy

According to the association for Financial Professionals’ 2015 Payments Cost Benchmarking Survey, nearly 80% of organizations are in the process of transitioning their B2B payments from paper checks to electronic payments. They’re discovering it’s not a one-and-done initiative, however, because it’s not just about payments. Moving operations to the digital realm impacts administration of the entire supply chain, from procurement and invoicing to payment and back-end financial accounting. Companies making the transition into an e-payments strategy—or at least incorporating new digital solutions into their existing payments mix—have these 5 factors to consider:

The bottom-line

Developing an e-payments strategy isn’t quite as simple as it sounds. Yet from a financial standpoint, it’s well worth the effort and becoming integral to operating (and competing) in today’s technology-driven and increasingly global business environment.

As presented in the infographic Transforming AP Through Automation, 68% of AP professionals are “going digital” to reduce overall processing costs. After all, the cost to issue the 8 billion paper checks made by US businesses each year, along with the cost of processing the 8 billion associated invoices, add up to nearly $100 billion in annual spend (Federal Reserve). What’s more, considering the costs and complexities inherent in wire transfers often used for large international transactions, it’s no wonder why companies are exploring digital alternatives that both speed up payments and cut costs.

Learn more in How Much Is Your Travel Business Losing On International Payments?

E-payments are simply more cost-effective when compared with traditional payments. Not only are they generally less expensive to process, but their relative speed and accuracy help companies maximize working capital and cash flow. Plus, decision-makers are better able to take advantage of vendor processing/payment system float and explore supply chain finance innovations such as dynamic discounting.

Business priorities

Every company is at a different point across the e-payment transition spectrum, moving along at their own speed according to their organizational readiness to adopt new processes. It comes down to goals—and some companies, in some industries, have to “get with the times” to stay relevant with customers and supplier partners. Two high-level business priorities that are driving payments innovation include automating operations and addressing security concerns are:

• Automating operations – aside from the bottom-line advantages of using e-payment methods, some companies want to “go paperless” as a corporate responsibility and sustainability initiative. The article You Have the Technology, Rid Your Organization of Paper Checks delves into strategy-backed reasons companies are pursuing e-payments.

• Addressing security concerns – 62% of companies, according to the Association for Financial Professionals’ 2015 Payments Fraud and Control Survey, were subject to payments fraud in 2014. That’s a compelling reason to put AP processes and practices under the microscope and address risk management as it pertains to B2B payments. Traditional payment processes are usually at the heart of security breaches, explaining why newer, digital forms of payment are being adopted.

Read Top Performing AP Teams Add Strategic Value Through Automation Technology and Five Types of Fraud Cutting into a Merchant’s Bottom Line for additional insights.

Existing infrastructure

Implementing e-payments isn’t necessarily a plug-and-play undertaking. Although some forms of e-payment, like virtual card numbers, are simple to adopt because they use the technology AP, and supplier AR departments are already using in their day-to-day business processes. Others require some IT management to get up and running. Depending on how a company currently manages their supplier payments—do they use in-house tools or SaaS solutions—incorporating new forms of e-payments into the mix usually requires some systems integration to connect the new technology to the accounting, ERP, and expense management systems used by the company.

For more on this topic, read 3 B2B System Integration Tips for the (Non-Tech) Payments Professional and The 3 Components of a Successful Tech-Fueled Procurement Transformation.

Employees’ Readiness

Company culture plays a role in successful technology adoption. As discussed in 3 Tips to Prepare Your Payments Organization for What’s Next, many companies introducing new technologies have to apply principals of change management to ensure user buy-in. Transitioning into an e-payments strategy tends to run smoothly in workforces who already use automation technology, or are filled with younger, more tech-inclined employees. When asking an AP department to completely change their workflows and learn new ways of processing payments, for example, managers need to consider their workers’ learning styles and understand how they are using technology in their personal lives, outside of the office, and leverage the right communications and training tools.

See BYOD: Mixing Personal and Business…Expenses? and Eight ‘Touches’ You Avoid When You Move to E-Payments.

Supplier Relations

Supplier acceptance of e-payments is paramount. A company can’t make an e-payments strategy work if the company they want to pay has a “check-only” payment policy. This day and age, more companies are accepting alternative forms of payment—and for many of the same reasons their customers want to use them. E-payments are a win-win: they’re cost-effective, timely, more accurate, and more secure. And because of the enhanced data exchange provided with e-payments, both the sender and receiver of payments benefit from insights derived from data analytics—and the insights can be used to improve payment terms and other components of the customer/supplier relationship.

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