B2B Payments

Finding The Best Point Of Entry For Early Payment Discounts

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Accounts payable is certainly a major way businesses can manage cash flow, but thanks to automation, AP can also be a strategic profit center for the enterprise. The biggest way this happens is through capturing early payment discounts, but with so much talk of delayed and late payments, it can be difficult for the paying culture of a company to switch from one of holding off on paying suppliers to keep cash longer, to one of paying suppliers even before an invoice due date for the sake of shaving some money off the bill.

Nivo1, an accounts payable company, is hoping to make it as easy as possible for companies to change their payment habits. Earlier this month, the firm announced upgrades to its AP Express solution all aimed at facilitating the capture of early payment discounts.

“In many organizations, invoices are still being received at multiple locations in paper form,” said Howard McKinney, Nivo1’s AP Express product manager, in a discussion with PYMNTS about the challenges companies face at being able to pay suppliers early. “First, the AP department has no idea the invoice has been received, much less where it is located. Then, by the time the invoice is reviewed and sent to AP for processing, the opportunity to capture the discount is lost.”

AP technology firms have taken various approaches to helping businesses manage paper invoices, whether it be through automated data capture and entry solutions or enticing suppliers to nix paper altogether. But the challenge remains. Earlier this year, a report by MineralTree found that businesses are paying as much as $20 to process a single invoice, with about a third admitting that they have no idea how much invoice processing costs for them.

And beyond cost, MineralTree found, 91 percent of businesses surveyed said between two and five people are handling invoices as they move through the accounts payable department. That creates a lot of points where errors can be made and paper can be lost. Plus, with the time it takes for an invoice to actually be paid, and the cost incurred while doing so, it can be impossible for a business to ever pay an invoice early and capture a discount.

But according to Nivo1’s McKinney, businesses want change.

“Cash flow optimization is one of the key reasons the C-level is focusing more and more on better invoice processing management,” he said. “Companies can lose thousands of dollars per year in lost discounts and late payments simply as a result of poor invoice processing.”

While it may seem like a monumental challenge to overhaul AP processes and change payment habits, the executive said it isn’t as out of reach as some businesses may think.

“It is something that can be remedied fairly quickly and at a low cost if the right solution is implemented,” he said.

The competition is fierce. For Nivo1, McKinney said AP Express aims to solve AP issues by creating a portal through which every invoice is received, then digitized for review and approval.

“This enables AP to have visibility of the invoices throughout the entire process, and it greatly reduces the invoice processing cycle time, thereby increasing the opportunity to capture early payment discounts,” he explained. In addition to this single point of invoice entry, Nivo1 has recently launched a mobile app, another way McKinney said the firm is looking to compete for market share in this space.

“Hey, let’s face it: From a marketing perspective, you’ve got to have an app, right?” he joked, admitting that mobile apps are certainly a must-have for the cool FinTechs today. But there is a more serious reason why Nivo1 went the mobile route, too: access to invoice data on-the-go. It’s critical to capture early payment discounts when every minute counts.

“This is very important, especially from an invoice approval viewpoint,” he said. “If an approval can respond from a mobile device using the app, they have just helped them shorten that invoice processing cycle time … and helped improve their cash flow and reduce their invoice processing cost. I think that alone opens the minds of executives doing business in the cloud.”

That willingness to explore the cloud, automated services and, overall, a new way of doing business will continue to grow as companies look for better ways to pay, McKinney predicted.

“Companies will continue to want better and faster access to invoice and related data via analytic tools to make more informed business decisions,” he forecasted. “We should also see an increase in the adoption of cloud solutions as the security concerns are mitigated through improved encryption and storage protection technology.”

Adoption of these tools, he added, will become more democratized to companies of all sizes, and that’s good news for end consumers.

“Cloud solutions will also gain traction because it opens the door for small to medium-sized businesses,” he said, “where technology resources are very limited or even nonexistent, to utilize the same quality product as their larger competitor, which will strengthen competition and make things better for consumers.”

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