Report: Inflation Suspected In B2B Sector

By Pete Rizzo (@pete_rizzo_) 

New Jersey-based outsourced billing solution provider Billtrust released the results of its September B2B Sales Index on October 11, revealing that business-to-business (B2B) invoice activity increased 1.55 percent to a value of 103.75 in September.

The monthly report, which began publishing in August, tracks billing data in electrical goods, plumbing and HVAC and other wholesale trades to form a what Billtrust says is a leading indicator of U.S. nominal GDP growth.

With its latest release, Billtrust introduced two new B2B measures, the Billtrust B2B Invoice Counts Index and the Billtrust B2B Customer Counts Index. The indexes aim to track the volume of invoice counts, and the size of the customer base of the firms that generates these bills, respectively.

“Although invoice dollars were up in the past two months, invoice counts and customer counts were essentially flat compared to May,” Arthur Ferri, a Billtrust consultant who oversees the index, said in an October 11 release.

Overall, the Billtrust’s Sales Index outpaced its Invoice Counts Index by 1.45 percent in September and by 2.43 percent in August. The recent divergence between the two metrics, according to Ferri, presents evidence that inflation may have accelerated in the B2B sector.

For more on what the new report means for the B2B payments sector heading into the winter months, PYMNTS.com spoke to Ferri to break down the findings.

B2B Experiencing Higher Volatility

The Billtrust B2B Invoice Sales Index, according Ferri analyzes a specific subset of Billtrust’s customers – conventional B2B businesses that have been providing reliable invoicing data for three years. Of this subset, Ferri selected the 100 firms that had the lowest volatility of sales, the ones that he said have been “fairly well-behaved.”

As evidenced, from May 2010 to May 2013, Ferri said the index saw steady average growth of 0.67 percent per month. Then suddenly in June, the index flatlined.
“When we issued our first report in early August, we reported on the worst two consecutive months in the index’s 38-month in history,” Ferri said. “That’s when we thought there might be problems ahead for the economy.” 

Customers Counts Decline At B2B Businesses

September marked the fourth consecutive month where the study’s Customer Counts Index fell below figures found in May. Perhaps more surprising, September’s decline in the Customer Counts Index stands in contrast to the strong increase in the Sales Index for the same month.

“It looks like our customers are slowly losing their customer base,” Ferri said.

September’s Index decreased 0.08 percent from August to September to reach a value of 99.55. This increase was compared to the 0.77 percent uptick observed from July to August.

Invoice Counts Rise At B2B Business

Despite the decline in customers, September’s Invoice Counts Index rose by 0.10 percent from August to September to reach a value of 100.31. This increase was down from the 1.93 percent observed from July to August.

This data, when compared to Billtrust’s customer data suggests one of three possibilities according to Ferri: Its customers are charging more, selling more of the same basket of goods or earning more the higher-priced items.

“To me, when I see divergence in invoice dollars and invoice accounts, my suggestion is that inflation may have accelerated in this sector,” Ferri said.

What Do The Findings Mean For Processors?

Ferri didn’t draw a firm correlation between payments processors and how they be affected by the results, noting that variations in their customer bases could lead to different outcomes, but he did suggest trouble could be on the way for some in the B2B payments industry.

“One thing is pretty clear, the last four months, we’re really not seeing growth in invoices,” he said. “If you’re revenue stream is tied to invoice accounts and you’re not growing your customer base, you might see whatever growth you were experiencing to go away.”

For more insights and analysis, download a copy of the full report from Billtrust here

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