In the area of B2B, nearly every paper transaction has become electronic over the past decade. Today, businesses save an average of $55 per electronic transaction vs. a manual accounting process. In addition to cost savings, the drivers of migrating to digital processing for businesses include streamlining B2B transactions, increasing competitiveness, improving buyer conversion, reducing friction in the supply chain, improving customer service, and reducing overall risk to the business, supplier, and the buyer. However, despite these clear business advantages, the automation of B2B payments itself (the actual moving of the money) has not kept pace with other parts of the business. Key reasons that have slowed adoption of B2B payments include:
- Merchant costs of accepting traditional electronic payments
- The inability of electronic payments to integrate into existing B2B transaction workflows
- The lag time between purchase and final payment availability
- The increased number of bad debts and disputes that result in write-offs
- The more complicated method of electronically replicating signatures on paper
Other issues effecting those above involve overlapping B2B processes, resulting in poor use of human capital, logistics costs, increased procure-to-pay (P2P) cycle time, fraud due to lack of “good funds only“ B2B payment verification, and regulation compliance.
Impacts to the Business
The unpredictability of payment processes in B2B are hurting businesses in multiple ways. For example:
- Only 22% of companies can forecast short-term cash flow to within 5% accuracy
- 59% of CFOs report issues caused by poor visibility into supplier payments
- Over 30% of invoices are paid after the due period (usually 30 days)
- 60% of B2B payments are managed via manual processes
- Up to 24% of B2B transactions result in payment exceptions and mismatches
All of this leads to expensive and slow payment processes, poor working capital optimization, unpredictable cash flow, and needless tension between buyers and suppliers.
Addressing the Gaps in B2B Financial Transactions
Given the growth of B2B e-commerce and the ease of reaching new markets and customers on a global business, organizations are demanding cost reduction and improved cash flow transparency. Straight‐through processing and real-time, 24/7 electronic B2B payment methods that enables rich data connected to the payment addresses these gaps. The straight‐through method reduces risk, does not require human intervention and re-keying. Financial institutions and planning businesses, banks, and energy corporations find this capital market use of B2B payments transaction beneficial.
There is also a real need to create an electronic B2B payments network where buyers and suppliers may also connect their (peer-to-peer) P2P and order-to-cash systems. Change management, outsourcing, and a centralized accounts payable (AP) solution are key. Increased P2P cycle time is costly and negatively impacts the business’ capital allocation decisions and forecasting. Efficient P2P systems enhance processing-time, control, and cost reductions, as well as procurement and fiscal visibility.
Buyers and suppliers routinely use the ACH or RTGS channel for payments today, but these traditional bank rails were never designed for global transactions, are costly, and not sufficient for the needs of B2B transactions. On the other hand, third-party and cloud services solutions and technology have evolved and are rapidly becoming mainstream. Third-party B2B cloud services are safe and secure, reduce capital costs and improve profit margins, generally improve response times, and encourage business collaborations and partnering. Being in the cloud also means that these new methods of payments are always up to date and can easily be adapted or configured to existing business workflows without the need for a massive IT investment.
The pace of business in the B2B market segment continues to accelerate. The digitization of everything and the rapid acceptance of e-commerce on a global basis is making it as simple to do business around the world as it is do business around the block. However, the lack of innovation and constraints of traditional B2B payment providers has artificially slowed progress for buyer- and seller-engaged transactions. The great news is that new non-bank providers like Traxpay have entered the market, and have removed these barriers, unlocking the key to faster, safer, smarter B2B transactions. Using Traxpay for B2B transactions, businesses now have access to new revenue streams, accelerated cash flow, and better protection against fraud and losses.
Give us a call to learn more about how you can get the Traxpay advantage working for your business.