B2B payments friction isn’t only experienced on the payer side. Often, accounts receivable challenges can cause significant disruptions to operations, and those consequences can ripple along the supply chain both up and downstream.
These hurdles can also stifle electronic payments adoption in the B2B arena. In the logistics space, for example, while shippers may want to pay their carriers electronically, lack of AR infrastructure to support that ePayment stops digital payment adoption in its tracks.
But sometimes, the biggest B2B payments and accounts receivable pain points start even before a transaction occurs, according to Rich Wessels, treasurer for transportation management and logistics technology company Transplace.
“I think a major pain point is upstream before you actually get to the payment itself,” he told PYMNTS in a recent interview.
That friction is all about data, and the freight bill audit pay process that involves analyzing a carrier’s invoice to assess its accuracy. While today this process is largely automated, Wessels noted that any exceptions and discrepancies must endure a heavily manual process that can delay payments from shippers to carriers or cause payment errors.
Wessels highlighted another pre-payment pain point that similarly causes disruptions for shippers: a lack of payment predictability.
“I think the biggest pain point is visibility into exactly when payments are going to be received,” he said. “Being able to see when the scheduled payment will hit, and exposing that data in a clean way.”
This lack of transparency into when payments will arrive is particularly damaging to smaller carriers that rely on that predictability to manage cash flow.
According to Wessels, there are several reasons why these challenges have been allowed to endure in the shipping and logistics market for so long. While it’s true that smaller players lack the resources to upgrade systems to support their own enhancements to accounts receivable, auditing and process automation, he pointed to third-party service providers and banks’ own shortcomings in making better solutions more easily accessible.
Transplace is hoping to address that gap and is focusing on collaboration in that initiative — both with those third-party intermediaries and with banks.
The company announced this week a partnership with logistics industry payment processing firm TriumphPay, and with Paymode-X, the B2B payments platform operated by Bank of America and powered by Bottomline Technologies.
In terms of strengthening payment predictability, Wessels said that addressing carrier friction relies on the ability for service providers to aggregate, consolidate and streamline data from multiple sources. He pointed to TriumphPay’s ability to collect information from multiple brokerages and present that data on a single platform, allowing carriers to not only obtain insight into the timing of their incoming receivables, but to view it in a holistic way.
“Visibility is a big part of the value prospect and plays into carriers being able to make invoice-level, quick-pay decisions,” he said.
But there’s another aspect to visibility in this sector that also highlights the challenges industry players face in the post-payment process.
“At the other end of the spectrum, it’s the visibility into all of the supporting documentation,” he said, adding that this is a major challenge for the larger carriers in particular. “For them, it’s not so much about payment timing, or the payment itself, as it is about the supporting documentation that goes with it.”
Having access to key data surrounding a transaction is critical for both sides’ reconciliation processes, he added, which is where the collaboration with Paymode-X comes in. Further, as banks and other industry participants continue to prioritize traceability of funds and accessibility of transaction data in various faster and global payment efforts, the opportunities for service providers to take advantage of those capabilities for their logistics industry clients will grow.
Failure to Act
The logistics industry, its third-party service providers and banks must all collaborate to address the biggest B2B payment pain points of the sector, said Wessels, and a history of lackluster offerings has been holding the sector back from digitization.
“It’s a bit of a chicken and egg,” he said. “The carriers have struggled to adopt electronic payments on a widespread basis, but there’s also been a lack of initiative and follow through both from banks and from intermediaries.”
Without this collaborative effort, the knock-on effects of payments friction — which reaches both before and after an actual transaction — will be allowed to ripple through the supply chain.
For larger carriers, Wessels said that this lack of adequate data exchange has companies relying on outdated and possibly faulty EDI tools that require manual intervention in the case of an EDI failure. A lack of visibility can mean that carriers might not even know an EDI failure has occurred, meaning that business could be standing in its own way of receiving a payment.
For smaller businesses, the inability to predict when cash is coming has broader effects on other decisions its making, including fuel purchases and financing.
These friction points, said Wessels, “can easily drive a bunch of bad business decisions on both sides.”
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