B2B Payments

ACH Becoming The Mediator Between Conflicting AR, AP Needs

Just a few weeks ago, the Global Payments Innovation Jury – a group of 70 payments executives across 37 countries – published a new report on the expected future of the payments industry. The report had some big news for B2B payments in particular:

“Overall, the jury considers the business payments sector to have the best profit potential going forward,” the report stated.

Disruptors in B2B payments have an opportunity to access larger profit margins, it continued, in a market less saturated than the B2C payments space.

“B2B has better profit potential, however, there is a lack of appreciation in many markets for this, and our local banks are still trying to do it with legacy solutions,” said one jury member.

The FinTech industry has risen to the challenge of knocking out many of those legacy solutions, and innovation in accounts receivable and accounts payable is on the upswing. But often, FinTechs will tackle either one end of the B2B transaction or the other.

Paybox is looking  to position itself in the middle of B2B payments by offering both AR and AP automated solutions.

“There is no question that it permits you a different view into the evolving customer requirements,” said Paybox Chief Executive Officer and Chairman Matthew Ettinger Oakes in a recent interview with PYMNTS, "and helps you build a larger customer and vendor network as well as understand spend.”

“Providing both AP and AR solutions to our customers gives us the access to their changing needs,” added Robert Gilbert, vice president of sales and marketing at Paybox. “Being present on both sides gives us greater visibility into the needs of customers and vendors. By understanding both AP and AR, we have cross-platform knowledge.”

That can be a difficult position, considering the often conflicting needs of AR and AP.

For example, last month a survey from Dun & Bradstreet and the Pepperdine Graziadio School of Business and Management released new research on companies’ cash flow management challenges. Their Q2 2017 Private Capital Access Index report found that more than a fifth of small and medium-sized enterprises said their accounts receivable has slowed in the last three months as corporate buyers lengthen payment terms to hold onto cash longer. Researchers noted that slow AR negatively affects a company’s ability to grow, especially for the smallest of businesses.

Meanwhile, accounts payable executives seem to be more concerned with technology disruption their field will experience in the coming months and years.

Separate research from WEX found that about half of CFOs expect blockchain technology, for example, to change how the AP function operates in the next six to 12 months. Nearly three-quarters said they have some form of an electronic accounts payable initiative underway to adopt electronic payments.

For a single business, juggling delayed payments with a desire to digitize its own supplier payments may come into conflict.

But according to Paybox’s Gilbert, there are some overall trends in how a company approaches its payments strategy.

“Currently, we see companies focused on eliminating paper, automating workflows, implementing smart ePayments with dashboard functionality and level-one analytics,” he said. “As machine learning and artificial intelligence continue to evolve and impact one of those four processes, companies will look for ways to incorporate them.”

In AR and AP, technologies like AI may help a business better understand its cash position and more accurately forecast cash flow. Gilbert explained this as CFOs focus on “touchless automation solutions” and easier integration of processes for a company’s own customers and vendors “while providing increased levels of visibility, reporting and analytics to create better business outcomes across the board.”

But while the underlying accounting infrastructure may be embracing technology, the payment itself remains slow, with paper checks still posing a major challenge both to AR professionals’ needs for faster payments and AP professionals’ needs for digitization.

“Checks will never go away in the near term,” Oakes said, “because the rate of change and adoption of new technology sans a government mandate such as a VAT just isn’t there.”

But even without a government mandate, businesses continue to shift toward electronic payments, albeit gradually.

A survey released by NACHA last month, along with the Credit Research Foundation, found that AR professionals are experiencing an uptick in the number of payments they receive via ACH, while check payments appear to be going down. Indeed, the report found  that while checks are more common than ACH today, by 2020 checks are expected to decline to 34 percent of all payments received by the AR department. At the same time, ACH is expected to make up 45 percent of payments, with increases in card payments, too.

“ACH is the logical step with the more progressive finance people, especially in light of the new Same Day ACH model that is being promoted,” added Oakes. “Card adoption, or lack thereof, has been a story for the last five years, and I think it is because of cost, partially, as there is an association with higher fees with cards.”

While AP professionals look to technology to make their processes more efficient, and AR executives seek electronic payments to help their organizations get paid faster, it makes sense that ACH is quickly becoming the middle ground between the often conflicting sides of B2B payments.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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