B2B Payments

Too Many Moving Parts In Accounts Payable, Warns Tipalti

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A new report by supplier payments automation firm Tipalti says accounts payable executives are spending too much time paying their suppliers or getting their supplier onboarded onto a system to get paid in the first place.

The “Global Payments Operational Trends” survey, the results of which were released on Monday (Aug. 8), found that nearly half of survey respondents spend at least six hours every week just paying their suppliers. More than one-fifth said at least four hours every week is spent onboarding suppliers to their systems.

“The survey found that this workload impacts profitability and productivity since supplier payment operations are essentially a cost center,” Tipalti said in its announcement. “Many finance teams must trade off time spent on more strategic, analytical and value-added finance activities in order to manage day-to-day supplier payment processes effectively.”

Making the problem worse is that companies are making a lot of payments to their business partners.

Between 100 and 499 payments made to suppliers every month was the most common volume for survey respondents, with nearly one-third falling into this category. But one-fifth said they make 500–999 supplier payments monthly, and even more — 24 percent — said they make more than 1,000 payments. More than three-quarters of these transactions are more than $500 each.

As a payments automation firm, Tipalti naturally promotes automated technologies as a way to streamline the accounts payable process. But automation in the onboarding process, the company added, is also likely to remove a lot of friction from the AP department.

“As companies look to grow and scale their businesses, they will either need to invest more in accounts payable resources/personnel or identify technology to help automate their supplier payment processes,” said Tipalti Cofounder and CEO Chen Amit in a statement. “Finance leaders of both small and large companies need to proactively determine the best approach to handle their increasing volume and complexity of global supplier payments.”

“Consider how the costs related to managing supplier payment operations distract from your ability to focus on more strategic and growth-oriented opportunities,” Amit added.

The most common way businesses onboard their suppliers to their payment platforms is by email communications (43 percent), followed by in-person or over-the-phone discussions (36 percent). Only 10 percent offer a self-service online portal.

But the actual process of paying a supplier is also leading to wasted time, Tipalti discovered.

The more payment methods a company has, the more time it takes to remit a payment, researchers found. Plus, the data revealed, companies are using a variety of payment rails to make supplier payments. Paper check remains the most common rail, but wire transfer and ACH are used by the majority of companies. Even PayPal and electronic wallets are catching on, managed by 19 and 16 percent of companies surveyed, respectively.

So, while companies may be adopting electronic payment methods, they aren’t replacing legacy, manual rails, and more payment rails isn’t necessarily better.

Supplier payments are globalizing; Tipalti researchers found that, while today, 98 percent of the businesses surveyed are sending supplier payments to North America, that figure is expected to drop to 86 percent in the future as payments made to Asia-Pacific, Latin America, Middle East and Africa are slated to rise (while payments to suppliers in Europe are also expected to decrease).

With so many businesses naming regulatory compliance as their top concern for accounts payable departments, globalizing supplier payments will not only mean a demand for faster, more transparent transactions but also to remain compliant across jurisdictions.

Further, the current dependence on manual supplier onboarding tools will also likely see increased pressure to change as partnerships with vendors continue to speed across the globe.

“Even in companies with basic automation, there are ways to improve areas that are company cost centers,” concluded Tipalti in its research report. “Taking a holistic approach to supplier payments can streamline much of the activity and reduce friction.”

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