Historically, B2B payments have lagged behind other types of payments. This gap has been magnified in the post- COVID-19 pandemic world. According to the Global Payments Trends Report, 2022 will find B2B payments undergoing a digital transformation to meet the expectations of vendors and suppliers alike.
Digital B2B Payments Are a Timely Trend
The transformation to simplify and streamline B2B payments is timely, as many factors such as rising wages and food costs further erode operator profits. Facing a staffing pinch, operators need to simplify and streamline wherever they can. If a restaurant or district manager could avoid sifting through and organizing piles of paper invoices and cutting physical checks, they might be able to focus on other important and impactful aspects of their jobs.
While the use of paper checks continues to decrease by the year, it still accounts for more than 50% of the overall transaction value for B2B payments
When it comes to vendor relationships, businesses are still preparing and sending paper invoices, or emailed invoices that get printed out and annotated by someone in an office who inputs it into an ERP system. The payment experience is even more manual. For
for example, someone writes paper checks, puts them in envelopes, or inputs payments into a spreadsheet for uploading to the bank for ACH or EFT. Or it’s someone with a corporate purchasing card calling the provider and giving the payment details over the phone. These are all very highly manual and time-consuming processes by today’s standards!
With the recent move to a more remote workforce, many businesses see that their employees need to manage their accounts receivable and payable functionality outside of a physical office. Digitizing B2B payments, including accounts payable, accounts receivable, expense reimbursement, and employee-initiated spending, offers significant benefits.
B2B Digital Payments Offer a Range of Benefits
Digital B2B payments are quicker, simpler, and less time and labor intensive. Plus, they can be pre-scheduled and can process in minutes versus days.
With digital B2B payments, a business has more visibility into what funds are going where and why. In turn, they gain the transparency and control needed to optimize cash flow, reduce errors, and mitigate payment-related fraud. Another benefit in reducing your manual payment processes gets down to the bottom line: saving money. Reducing checks by 10-50% equates to $1.3-$58.3 billion savings each year. The hard costs of B2B check payments disappear when migrating to digital processes including paper, postage, and the time it takes to stuff envelopes.
Predictions About Digital B2B Payments
For all of these reasons, global B2B non-cash transactions will increase to nearly 200 billion transactions by 2025, from 121.5 billion in 2020, according to Capgemini estimates.
The digitization of B2B payments continues to grow, as evidenced by high valuations of public firms bringing solutions to market and the amount of venture capital money backing a growing number of fintechs. The tipping point–meaning a rapid acceleration away from checks and manual payments–is poised to happen soon.
Make B2B Digitization a Priority
Businesses should transition from paper-based payments to a seamless, digital connection of all the steps in the cash cycle, from procurement to reconciliation. For example, virtual cards, a digital credit card with a randomly generated 16-digit number designed for one-time use and only authorized for a specific dollar amount, can help your organization better manage cash flow and employee spend while helping avoid fraud and theft .
There are plenty of opportunities like this within the B2B payment processes but it requires your diligence and working with the right provider to identify them for your unique business. Ultimately, the benefits of increased efficiency and reduced expense will fuel this trend.
The Bottom Line
Managing invoicing and payments using traditional methods was labor and time intensive. Restaurateurs and other merchants find that handling these things electronically saves time and money, avoids delays, expedites payment and quickly closes the loop on reporting, while keeping vendors happy. Vendors that regularly get paid on time may be less likely to tack on fees or raise rates and may even be more willing to negotiate better deals/pricing.
Editor’s note: Much of this B2B payments post originally appeared under a different title on the Global Payments blog and as part of the company’s 2022 Payments Trends Report.