A Holistic Approach to “Electronifying” B2B Payments

Organizations looking to break into the electronic payments world have taken a metered approach, but the opportunities and potential still exist for all of the savings, visibility, and speed that come with its adoption.

While some studies, including that of the Association for Financial Professionals, found that the great downfall of check use has slowed—hovering around 50 percent of payments made by check for the past four years—and there is industry optimism from many parties that there will be a continued push toward virtual payments.

Reasons for E-Payments Optimism

E-payments continue to be the future, and a Treasury & Risk article, “Electronifying B2B Payments,” noted some of the optimism and hope that industry experts have, including the cost savings and efficiencies made possible with e-payments, as well as the growing concern about fraud that convince some companies to pay electronically.

But the article goes on, noting how e-payments are enhanced by the growing interest in supply chain finance, which gives buyers something to package with e-payments to persuade suppliers to accept them. There’s also a great deal of work being done right now on how to provide faster payments, and that could end up encouraging electronification.

Inclusivity Key to Getting Suppliers on Board

For years, one of the biggest challenges in e-payments adoption has been the issue that persists in communicating the benefits from supplier to purchaser or from purchaser to supplier. 78% of suppliers have had difficulty in convincing their customers to pay them electronically, and 76% of customers have cited difficulty convincing their suppliers to accept e-payments, per AFP.

Combined with the communication, a lack of IT resources is another concern in the adoption of e-payments, cited as a challenge by 76% of companies surveyed, “The biggest holdup usually is shelf space on an IT project list,” said Scott Mills, payments solution manager at Fifth Third Bank. “What it comes down to is the buyer’s ability to make the adjustment in their ERP system to create the data file format they need to get the information out.”

To address the challenges in e-payments adoption, Payment Week looked at the importance of an inclusive, holistic approach to payments technologies as a key to success, highlighting the importance of transparency and visibility in order to design a more detailed cash management strategy.

“The ability for payment technologies to boost corporate cash management by adding visibility into their cash positions can help finance executives beyond individual transactions alone. Information as basic as buyers knowing their payment has been received by their supplier, and suppliers knowing a payment is headed their way, means far greater control of finances throughout the entire source-to-pay process”

Author Matt Clark adds, “Streamlining source-to-pay yields benefits that go beyond payment efficiency,” demonstrating the importance of automation and its role in data visibility, accuracy and speed for the entire Accounts Payable department and the pitfalls that come with manual payment processes:

“By automating the full lifecycle of a transaction, including the elusive payments portion, organizations can have greater visibility into spend and dramatically reduce costs. The key to lucrative adoption of holistic, automated payment processes lies in introducing a system that is open, scalable and flexible, something that can accommodate existing data and integrate all new data as well.”

For more information on how automation and making improvements to supplier payments, see “Interest in Faster Payments Drives Electronic Payment Adoption,” as well as You Have the Technology, Rid Your Organization of Paper Checks and PYMNTS.com’s The Fastest Path To Faster Payments In The US.