Why the Way Companies Get Paid Defines Their Future

The current economy’s transitionary challenges have organizations increasingly looking to identify and capture efficiencies.

One of the biggest operational impacts being realized is how businesses shift their technology investments to meet their financial operations’ changing needs.

“The COVID-19 period woke the marketplace up to the fact that those [enterprises] with a digital strategy would have a competitive advantage,” Fredrick “Fritz” Smith, CRO of end-to-end accounts payable, accounts receivable procurement solutions company Corcentric, told PYMNTS.

Times of turmoil, while they may feel chaotic in the moment, are often looked upon as times of change and innovation as organizations shed old growth strategies for new focuses.

PYMNTS research shows that more than 9 in 10 companies (94%) are investing in digital technologies in at least one area of payments and finance, with a similar percentage (87%) planning to invest in the future.

Smith emphasized that as a result of the modernization of payments systems and capabilities, driven by the need for businesses to move away from legacy, often manual back-end processes, the CFO role is increasingly taking on more responsibility.

That’s because the way that organizations get paid now can define and frame their growth in the future, Smith said.

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Refocusing the Finance Department

“When you look at the overall source to settle ecosystem,” Smith said, “you have buyers that want to pay later, and you have suppliers that want to get paid faster.”

Sitting in the middle, he noted, are often the CFOs — who tend to expect a certain level of efficiency around the best payment modality.

Smith added that within B2B ecosystems there are always frictions, but savvy CFOs know that by optimizing the ways they are getting paid and the methods of payment they can realize a better picture of the overall end-to-end movement of their organization’s cash conversion cycles.

“There is this notion of a control tower — maybe there is an opportunity to monetize payment or delay payment through an optimization of the cash conversion cycle,” Smith said. “Regardless, CFOs need to do a bit of working capital analysis to see the ways in which they can create operational efficiency and remove the friction that sits in the B2B ecosystem

By unlocking working capital, CFOs and finance leaders can oftentimes create new strategies for access to cash, he said.

“Looking inside and realizing there may be opportunities through the reduction of day sales outstanding (DSO), while also recognizing that there are methods of delaying payment that can give businesses access to their cash for longer,” said Smith.

An Ongoing Dialogue

“There are often systems that exist inside organizations that aren’t yet unified in such a way as to give CFOs and other departmental leaders access to critical decision-making information,” Smith said, highlighting that fragmented systems and a lack of data continuity often plague enterprise organizations.

The solution, he said, is establishing a single source of truth through a centralized system that removes point pieces while integrating functionality.

“The world is changing very fast relative to the way in which digital payment strategies can be incorporated and their ROI (return on investment) realized,” Smith said.

He underscored that effective digital strategies should provide operational wins across two fronts. The first is creating greater operational efficiency and removing paper and legacy manual processes that are no longer effective. The second, he said, is by removing the historical silos endemic to how various internal processes have “always been done,” and removing them so that there is better holistic integration across the business.

“That can only be done digitally,” Smith said. “The way you get information out of your systems is something that we all need to be thinking about right now — and there is no better way to do it than with digital.”

There is going to be a need for investment, he added, saying that “just like with the internet [back in the early aughts and late ‘90s] it is a bit of the Wild West, meaning organizations need to figure out what their strategy is so that it is cogent enough to take advantage of what the marketplace can now offer.”