Innovation in accounts payable (AP) is now largely being driven not only by challenges in the way businesses make payments, but also by friction in the way their vendors and business partners receive them.
In the shipping and logistics space, a market notorious for its fragmentation and bottlenecks, the focus on carriers and their accounts receivable (AR) challenges are an important part of solving the B2B payments pain point for shippers and freight brokers.
Those pain points are numerous, too, said Melissa Forman, senior vice president and chief operations officer of TriumphPay, a provider of carrier and vendor payment solutions for the supply chain industry. As Forman recently told PYMNTS, siloed back-end platforms can be among the biggest challenges to ensuring all players in a supply chain are able to exchange information — and money — seamlessly.
“The transportation industry is highly fragmented,” she said. “Shippers, brokers and carriers each have their own systems of record in addition to peripheral service providers, such as ELD, track-and-trace, factoring companies, and payment processing providers. The biggest struggle is having connectivity between those players to facilitate transparency and efficiencies in the life cycle of a payment.”
Hurdles at Every Turn
That lack of connectivity and integration makes for sluggish B2B payments. The shipping arena requires a high burden of paperwork to even initiate the payments process, Forman explained. Carriers must provide verification that a load was delivered, submit bills of lading, provide invoices, and provide documents with any claims submitted by their customers. Brokers and shippers must review all of that data before they can obtain approval to make a payment to that carrier.
The hurdles don’t stop there, either. According to Forman, once all of that documentation has been collected and provided to a shipper or broker, these companies must also overcome the costs and burden of manual check issuance and ACH initiation — the two most common methods with which this industry makes B2B payments.
Further, carriers’ heavy reliance on invoice factoring — Forman said TriumphPay estimates about 50 percent of B2B transactions in the market flow through factoring companies — creates yet another participant in the ecosystem bogged down by silos and a lack of connectivity.
The AR Focus of AP Solutions
For shippers and freight brokers, the AP process is riddled with challenges as a result of this lack of connectivity and manual processes. These companies operate with anywhere from 1,000 to 30,000 carriers, Forman explained. Turnover is high, and businesses are often tasked with manually collecting, verifying and inputting the bank account information of each of these carriers in order to pay them.
But at each of these B2B payment obstacles, it’s the carrier often facing the greatest burden. It’s why any AP solution that aims to accelerate payments and reduce shippers’ and brokers’ biggest pain points cannot succeed unless it has a heavy hand in also knocking down these barriers for carriers and their AR processes.
“A carrier is a broker’s most valuable asset,” said Forman. “Knowing they have a carrier they trust to consistently deliver safely, and on time, for their business is critical — and we take that relationship very seriously.”
She added that TriumphPay considers itself, by extension, a service provider of the carrier, acknowledging the importance of seamless and timely B2B payments in supporting a better carrier-shipper relationship. Working with the carrier means allowing that business to gain a holistic view of their outstanding invoices and progress of each transaction.
To take the proliferation of AP solutions beyond the buyer-side one step further, Forman also pointed to the importance of service providers connecting with factoring companies in order to not only connect carriers with a way to seamlessly factor their invoices of choice, but connecting with factoring companies directly, too, so they have transparency into their existing arrangements.
As complex and manual as today’s shipping and logistics arena is, it’s only going to grow more complex. Organizations will have to reconcile with the fact that, as they digitize and embrace cloud-based solutions, their continued use of paper and checks creates even more barriers between online portals and physical paperwork.
Plus, Forman pointed to foreign exchange challenges as businesses find it easier to expand across borders — and more difficult to address the unique problems that come with cross-border trade and global B2B payments.
She emphasized two focuses that will be essential for an AP solution provider to find success in an evolving landscape.
The first is to remain on top of regulations.
TriumphPay is operated by Advance Business Capital, which itself is an operating subsidiary of TBK Bank, SSB. TBK Bank itself is a subsidiary of Triumph Bancorp. As a bank entity, the company can provide the kind of payments assurance that Forman said other, non-regulated service providers cannot.
Second, she said, this industry must continue to expand its focus beyond the challenges of the buyer.
“Providing a service that is mutually beneficial to all parties is not something most providers have focused on in the past but is a top priority for TriumphPay,” she said, adding that providing visibility means servicing not only brokers and shippers, but also carriers and factoring companies.