People learn to live with their messes, whether that means piles of old clothes stuffed into the closet, emotional baggage from high school or that wine stain on the carpet. The same goes for businesses and B2B payments, where the amount of paper used for invoicing and checks serves not only as a point of friction and inefficiency in this digital era, but represents the inertia and attachment to the sloppy past that entangles the best of how business is done.
That’s hardly news, though the point has vital importance in the payments world, given the money and other stakes involved in how businesses pay each other. However, look at the issue this way: What if small businesses (SMBs) could provide some of the push — a significant part of the critical mass — toward the wider digitalization of B2B payments?
Succar, a Google veteran who joined Intuit nearly three years ago, gave an update about the QuickBooks-Intuit effort to bring more small businesses — and small businesses that are growing — into the B2B payments and accounting software ecosystem. She offered a vision about how that effort might impact the larger world of invoicing, payments and, fundamentally, how businesses pay each other.
B2B Payments Waste
PYMNTS readers probably don’t need to be reminded of this, but the reality of the B2B payments sector remains staggering: B2B payments is not only big, but inefficient in a big way. Worldwide, B2B payments is a $127 trillion market, and growing at five times the rate of retail eCommerce payments. However, there exists some $3 trillion worth of “inefficiencies” in how those payments flow between trading partners, and much of that friction stems from the dominant role that paper plays in making sure businesses get supplied and paid.
In fact, research for a recent PYMNTS webinar found that 64 percent of B2B payments are still made with checks, even though 67 percent of consumer payments are made electronically. That’s a cultural, economic and bureaucratic gap that does not seem sustainable in the longer term, not without tensions and contradictions that promise to lead to even more supply chain friction, inefficiency and lost revenue. Sure, inertia is one of the main physical forces of the universe (check with Isaac Newton about that), but — eventually — something must give if a powerful force is moving the other way.
That is the thinking behind Intuit’s recent and ongoing investments in a digital B2B payments and accounting ecosystem, which uses Big Data and other tools to give small businesses better visibility into their cash flow and access to working capital, and enable more efficient electronic payments. Such investments, especially around the use of Big Data to drive innovation, “can change the game for the small-business survival rate,” Succar told Webster.
Tenets Of Change
So, what does that really mean?
Succar said that for Intuit and QuickBooks, it means using machine learning (ML) to better understand how money flows among small businesses, and between accounts receivable and payable departments, so that more efficiencies, discounts and other benefits around setting payment terms can be found and, at least, used for experimenting. It means being able to show an invoice in a digital platform as an expense, without risking any paper cuts, that can be set up for automatic payment, based on payment terms that buyers and suppliers negotiate — often resulting in accelerated payment cycles.
It also means, she said, increasing “the ability of small businesses to get paid how customers want to pay them,” which leads to more development of omnichannel, mobile and other digital payment technologies. Succar even described innovations that can connect the shipping, pricing and other apps that small business use — some 15 apps, on average, for operations — to the QuickBooks accounting software in an “open ecosystem” environment.
Perhaps even more importantly, Succar said it means investing in a risk infrastructure to support Intuit’s role as the intermediary that handles the underwriting, risk assessment and onboarding of new suppliers.
When Small Businesses Get Big
Succar believes that Intuit holds an enviable position in serving as the catalyst to enabling a digital payments experience.
Some 240 million invoices are run through QuickBooks software annually, 30 percent of which are sent to small businesses — and some 3.4 million businesses use the platform, with about 1 million added over the last year alone. Increasingly, Succar said, the founders, owners and operators of those smaller firms are from younger, digitally focused generations that don’t have legacy processes to shed, but they want access to an end-to-end, streamlined B2B payments process.
Succar added that one in 12 workers in United States are paid via the company’s payroll platform, including gig workers, who use QuickBooks to manage their own small businesses. The company moves some $400 billion worth of funds annually through its rails.
That is a lot of Big Data from which — with the help of ML — new products, services and processes can spring, she said. That’s a lot of natural interest for the B2B payments digitization push.
Intuit is also making a play to keep up with firms as they grow, via software called QuickBooks Online Advanced, which is designed for companies hitting the “mid-market” and has tools to deal with online bill pay, inventory management and other areas of operations. Succar expressed confidence that once small businesses experience the positive impacts of digital payments, the efficiencies and speed, cost savings and more will follow. That trend will be reinforced by, for instance, offering buyers more options to “get really favorable terms by paying early,” especially given the fact that buyers are typically interested in repeat business and the relationships that come from that, she said.
As the conversation was winding down, Succar and Webster discussed the notion of Intuit, via QuickBooks, as the SMB buyer-supplier trading network that powers that end-to-end experience — from payables to receivables, all the way to access to working capital and more than 5,000 apps that are integrated today with QuickBooks. They also discussed the advantage of using the QuickBooks accounting system as the financial source of truth to enable those payment flows — using software, payments and technology to power those digital payment experiences, create an incentive for more SMBs to get on board and perhaps even create the integrations for enterprise players that want to pay more easily, as well as efficiently pay those businesses for their services.
It’s an interesting thought that isn’t without its own set of challenges, Succar admitted, including the inertia that holds many businesses back from making changes, even changes that can accelerate how they get paid. Organizations, like people, often find a comfortable rut and stay there if it makes sense. However, ruts do eventually outlive their purpose.
“Once you get people out of the habit of paper invoices and traditional checks, that will immediately improve the time to pay,” Succar said. “That will change the game.”