Thanks to the pandemic, accounts payable (AP) is undergoing a seismic shift to digital.
Joe Proto, board chairman of AP fintech leader Finexio, likens the jolt to one following 9/11. Then, the financial industry had to find an alternative to physically moving personal and commercial checks between banks because planes were grounded. Banks began accepting electronic images of checks. This streamlined approach quickly became the standard.
Now the pandemic and remote work has thoroughly disrupted the current AP process, which involves multiple, manual steps. They include receiving mailed invoices, matching paper-based purchase orders to invoices and printing and mailing checks.
This time, the major leap forward is to more electronic payments between businesses. The move echoes a shift in how many of us prefer to pay our personal bills–digitally, from Venmo to ACH. It represents the consumerization of B2B payments, says Finexio CEO Ernest Rolfson.
The new state-of-the-art in AP: Payments as a service. Imagine a slick Uber-like experience that removes friction in payment processing for both payer and supplier. Such an experience would require an initial set-up of the supplier’s preferred payment option, such as ACH or virtual credit card, and then relies on cloud-based managed services and technology to complete the payment transactions quickly and reliably.
Problems with manual AP
At first, companies may see no reason to upgrade or speed up the payment process to their vendors and partners. After all, it’s a cost center versus a revenue center, right?
But the highly manual AP process prevalent in many U.S. companies is extremely inefficient and prone to human error, especially as payment methods, terms, channels and types proliferate. It can lead to:
- Violating payment terms of contracts. A breach can mean legal, financial and reputational consequences.
- Hurting relationships with suppliers and partners due to inconsistent or late payments.
- Escalating administrative burden. AP staffers already spend 84% of their time on tasks related to supplier payments, APP2P, 6 Most Important Metrics to a Winning Business Case for AP Automation.
- Struggles to meet increasing regulations and compliance requirements.
- Unnecessary spending on paper, printing and postage. Electronic payment types cost 30 times less than paper checks, according to AFP, Payments Cost Benchmarking Survey.
- Falling behind competitors that offer new digital payment types that their vendors and partners prefer.
- Missing out on a higher degree of data security from cloud technology and electronic payments. Paper checks account for 10 times more fraud than electronic payments, AFP Payments Fraud and Control Survey.
A better way: Digital payments-as-a-service for AP
The shift to a digital platform for payables brings many of the same benefits as moving to Expresso® for customer communications management and ExpressoPay® for handling consumer payments. It starts with cloud technology, which is instantly accessible from any location, enabling secure remote work.
A leading payments-as-a-service platform such as Finexio’s also:
- streamlines and automates payment operations
- improves real-time tracking and reporting
- promotes a digital-first approach with vendors to reduce AP costs
- customizes the supplier payment experience
Digital payments will soon be a must-have as opposed to a nice-to-have. Adoption of B2B electronic payments is much higher outside of the United States, with the active support of national governments that are also pushing real-time payments, Rolfson explains. The U.S. is rushing to catch up.
Preparing for cryptocurrencies
Digital B2B payment capabilities and expertise will grow increasingly important as cryptocurrencies quickly gain traction in business settings. As former Mastercard Executive Vice President Proto says, “Mastercard cannot run fast enough to offer digital currencies.” At the same time, the United States is exploring issuing a digital dollar, and the city of Miami in August became the first municipality to launch a cryptocurrency, MiamiCoin.
Instead of becoming digital currency experts, accounts payable staff can rely on payments-as-a-service platforms such as Finexio to guide them in accepting and managing cryptocurrencies.
Nordis offers digital AP payments
Through our channel partnership with Finexio, Nordis clients can take advantage of these digital B2B payments capabilities and more. AP clients simply send us a file with supplier accounts, payment amounts and payment dates and we take it from there. The platform automatically matches the instructions to aggregated supplier data, issues the payment through vendors’ preferred payment types and notifies the supplier.
It’s all accomplished without changes to other accounts payable processes, ERP applications, or existing bank relationships.
As a managed service, we and Finexio communicate directly with suppliers and partners to promote and arrange electronic payments. The Finexio platform offers 10 payment options, including ACH, virtual cards, wire transfers, cross-border transfers, echecks—as well as cards by mail and paper checks if those are the supplier preferences.
From cost center to cash optimization
With FinexioCash™, companies can go a step beyond electronic payments for payables to optimizing their cashflow. With this leading-edge solution, we pay suppliers as soon as the client approves the invoice, improving their cashflow in exchange for a small pricing discount. This approach also improves cashflow for the payer, since you pay us based on the contract terms, say, net 30 days. Through Finexio, we use short-term, third-party funding to finance the supplier’s early payment.
This type of cashflow option has historically only been available to the biggest brands. But with Finexio’s aggregated data, analytics, technology, third-party financing and expertise, we can offer this option to mid-sized to large companies now.
If you’d like to learn more about how Nordis can help you with B2B digital payments, please contact us.