Categories: B2B Payments

AR-AP Connectivity Forges Deeper Buyer-Supplier Ties

Innovations in accounts payable (AP) and accounts receivable (AR) have introduced new technologies to sit between buyers’ and suppliers’ systems for deeper integrations between business partners and their operations.

Tools like virtual cards (v-cards) and vendor payment optimization solutions, can address friction on both ends of a B2B transaction.

But there is also opportunity for some of those technologies to weaken a buyer-supplier relationship, as this week’s examination of the convergence of AR and AP explores.

Vendors’ V-Card Opportunity

V-cards continue to press further into the B2B payments arena as commercial card adoption grows.

On the AP side, v-cards can promote efficiency with more businesses embracing AP automation technology. Researchers predict AP automation technology spend will increase from $1.9 billion in 2019 to more than $3 billion over the next four years.

In a recent conversation with PYMNTS, Bottomline Technologies Vice President Brian Greehan pointed to the benefits of v-cards, a technology that enables corporate buyers to embrace the digitization and security of virtual payments. The data generated from v-card transactions is beneficial to both AP departments, and suppliers’ AR operations.

“Virtual cards digitally deliver payment instructions and data to vendors and [return them] back to AP for reconcilement,” he said. “Exact match controls make virtual cards easy to use and reconcile, quickening key components of the invoice-to-pay process.”

But Greehan wasn’t the only industry executive to highlight the opportunity for v-card data to bridge the gap between AP and AR.

Boost Payment Solutions recently spoke with Karen Webster about this trend, too, highlighting B2B suppliers’ growing focus on transaction data.

“The big question for suppliers is: ‘When I receive my payment, how can I be sure that I also receive my data in a way I can actually use to run my enterprise?’” said Dean M. Leavitt, Boost’s founder and CEO. “One of the biggest advantages of the card rails is that you are virtually unlimited as to how much data you can pass with that transaction.”

It’s a benefit that can be particularly impactful despite the ongoing concerns vendors hold with regard to transaction fees associated with v-cards and other commercial card products, as PYMNTS’ latest Next-Gen AP Automation Tracker explores.

Buyer-Supplier Cash Flow Management

V-cards are just one way that AP and AR are embracing connectivity through digitization.

A recent discussion between PYMNTS and Danielle Simer, Hyland Software industry solution marketing manager, noted suppliers are playing an increasing role in promoting the adoption of AP automation technology among their corporate customers. Cash flow management, she noted, is now a top driver of that shift, with corporates embracing strategic supplier relationships to strengthen their cash flow management strategies.

“To have that visibility and control over your cash flow, to better predict your outgoing cash needs, to better prioritize vendors and to better schedule your payments is a factor that has come up in recent conversations,” she said, “as [has] the idea of capturing early payment discounts and improving the control you have over your cash flow.”

Digitization and automation are behind the partnership between Billtrust and Corporate Spending Innovations (CSI), which just announced that it is integrating into the Billtrust Business Payments Network to support automation of B2B payments to suppliers within that network, promoting greater cash flow visibility and predictability for both buyer and supplier.

The BPN aims to ease supplier payment acceptance by enabling vendors to receive payment in their preferred method without disruption to a buyer’s payment preferences. In a statement, CSI President David Disque said the integration “offers our customers more opportunities to deliver supplier payments and strengthen trade relationships,” highlighting the ability for technology that eases friction for both AR and AP to support stronger buyer-supplier collaboration.

Supply Chain Finance Comes Under Fire

While technology that sits between AR and AP can often be beneficial to connecting buyers and suppliers, there is one financial product that has gained recent notoriety: supply chain finance.

Also known as reverse factoring, the financing solution aims to support corporate buyers’ cash flow management needs by lengthening invoice payment terms while connecting suppliers to financing on those unpaid invoices. While it can be an important cash flow management tool for both sides of a B2B transaction, critics argue the tool can be abused and support predatory supplier payment practices while forcing those vendors to accept discounts on their outstanding bills.

Such is the debate that has risen in Australia, in which two major conglomerates — Telstra and Rio Tinto — have come under fire for their supply chain financing practices. While the companies have since adjusted their vendor payment policies without supply chain financing, Australia Small Business Ombudsman Kate Carnell recently argued large corporates must do more to support small suppliers through timely payment practices.

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The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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