B2B Payments

Why Cash Management Is Driving Corporate’s Digital Payments Transformation

Corporates are diving into an unprecedented opportunity to digitize and modernize. Whether it's the result of necessity in a remote working environment or of a slowdown in business that frees up time to focus on the transformation, organizations are quickly flocking to their banks and FinTech partners to finally do away with paper in the back office.

Now that businesses have gotten a taste of what it means to automate workflows like invoicing, accounts receivable (AR) and cash management, they're likely never turning back.

But in a recent discussion with Karen Webster, Sandra Blair, executive vice president of MerchantE; Keith Smith, founder and CEO of Payouts Network; and Walter Goracke, senior payments and billing analyst at travel marketing firm Sojern, noted that the digitization journey doesn't stop once a business is able to send an invoice and receive payments electronically.

The digitization push is propelling the B2B ecosystem closer toward the eCommerce model — and while enabling B2B vendors to sell and collect payments online is a move in the right direction, the adjustments they'll need to continue making will ripple throughout their approaches to managing cash inflows, outflows and application.

Noticeable Change

Overcoming the fear of change is not easy in any organization — particularly firms that have relied for years on paper and manual processes in financial departments like accounts receivable. Today, the firms that have begun the transformation are quickly recognizing its benefits.

"Those who have started down this path have realized there were a lot of inefficiencies," said Blair. "They're getting the taste of being able to get cash flow faster and give their supply chains choices in how to pay. I certainly don't think it will go back to the way it was."

On the front lines of implementing some of this digitization shift within Sojern, Goracke highlighted the importance of using technology to reduce days sales outstanding (DSO) — particularly in an industry that's been hit as hard by the pandemic as the travel sector. This moment of a business slowdown, he said, presented the company with the opportunity to dive headfirst into a modernization initiative, one he said can only be effective through a cohesive cash flow strategy.

That means not only digitizing invoices, but actually integrating payment capabilities on that electronic document, or within the company website itself.

For the customer, this means a seamless payment experience. But for accountants and AR departments, this integration strategy can go even further. Goracke pointed to the value of interconnected banking, invoicing, accounting, payments, cash management and other platforms for a holistic, unified view of financials.

Interconnected Finances

For a global company invoicing in multiple currencies and accepting payments across borders, obtaining that unified view is key to understanding financial positions. According to Smith, the ability to ensure that all back-end platforms and workflows can connect and communicate with each other tackles a key point of friction for today's financial professionals.

Rather than toggling back and forth between banking portals and accounting apps, organizations can obtain insight into what Smith described as "dynamic capital management."

Addressing the friction of payment acceptance is essential to digitizing finances, shortening DSO and migrating online, "but that's not where it stops," said Smith.

There is a bigger picture that organizations must examine as part of their transformations. Smith pointed to a range of questions businesses must ask themselves once the money flows in, including how to apply cash, which invoices to pay and when (and how) to pay employees same-day.

"How do I manage capital overall?" he said. "Dynamic capital management is the opportunity, and when it comes to B2B, that is really untapped."

A Competitive Differentiator

Businesses' digitization initiatives in areas like accounts receivable, accounts payable and accounting are sure to support the broader migration of the B2B ecosystem toward the eCommerce model. But as this shift occurs, organizations must keep in mind the broader impact on cash management.

Typically, change is slow. But in unprecedented times, organizations are acting quickly.

Blair noted that businesses are viewing functionality like eInvoicing and online payment acceptance as competitive differentiators.

"It gives a different level of service to customers, especially in the B2B space," she said, adding that as more businesses see their own vendors offering these capabilities, they'll want to follow suit. "I think a year from now, we'll see a pretty deep adoption and [will] continue to see innovation."

Indeed, said Smith, the adoption curve has both accelerated and been shortened as a result of the worldwide disruption of the pandemic. Taking the digital leap won't be a silver bullet to solve all of a company's financial hurdles — and indeed, it can even introduce some new challenges for cash management strategies. But organizations have already proven to be resilient and more willing than ever to tackle these obstacles head-on.

"Even though we're living in tough times right now, globally, this has actually helped businesses understand their challenges," he said.