Cash Flow Needs Have Made B2B Automation ‘Top Priority’ for CFOs

B2B payments are complex and costly, and overhauling them to automate back-office functions takes time and money.

Corcentric President and Chief Operating Officer Matt Clark told PYMNTS that B2B modernization is, more than ever, top of mind for chief financial officers (CFOs) at companies large and small.

He said the adoption of digital solutions by firms to improve their accounts receivable (AR) and accounts payable (AP) has been accelerating. And that acceleration has been taking a cue from the streamlined, intuitive interactions that are the hallmarks of B2C commerce.

As Clark said, “B2C always leads the way because that’s where all the big investment dollars go — B2B often trails behind.”

But now, in the age of COVID, as Clark said, CFOs have been taking stock of their back-office solutions that have been stitched together from a range of providers and across a range of point-by-point software programs. Financial executives may have been trying to lead their own digital transformations, although those technological initiatives were arguably lower-level priorities.

Part of that hesitation has been tied to the fact that solutions providers have typically come from two “angles,” as Clark said. They can be tech companies that know how to do software well, but are not adept at finance and payments. Conversely, there are payments-focused firms that have roots in B2C but don’t know as much about the B2B arena — and, in particular, the complexity of buyer/supplier interactions. In B2B, by way of example, the purchase orders, invoices and preferred payment methods all must be part of the dialogue between buyers and suppliers.

Cash Flow is Critical

But hesitancy may be a thing of the past as cash flow is more critical than ever and may be a life-or-death situation for the company that is struggling to keep its doors open.

“I think COVID hit CFOs right between the eyes in terms of where the opportunities for improvement were and what their points of exposure have been” in terms of late payments and workflow inefficiencies, said Clark.

And yet, beyond that old saying that timing is everything — cost is a factor. PYMNTS research indicates that although there’s general recognition that automated AP and AR functionalities reduced delinquencies, saved time and reduced errors, the 60% of firms with top lines of $25 million to $1 billion said that they did not have funds available to “pull the trigger” on what they need (and want) to improve their operations.

But as Clark noted, the improved cash flows that come with automation help the systems, in a way, pay for themselves and notch significant returns on investment.

With a nod to his own firm’s momentum, Clark said there’s been “a lot of traction” with CFOs on the order-to-cash and AR sides of the business. The firm’s AR management solutions can ensure that buyers pay their invoices within agreed-upon terms with a specific days sales outstanding (DSO) through supply-chain-finance-like arrangements.

“We’re just trying to get them to terms,” he said of those suppliers. “And just getting them to terms is freeing up a ton of cash flow for those suppliers on large dollar amounts that [suppliers] felt they didn’t have any avenue to get out because they can’t reach into their customer’s bank account and pull money out.”

Recounting one large customer in Europe, he said Corcentric was able to shave 17 days off their DSO.

He predicted such improvements and initiatives will only gain momentum in the months and years ahead. Automating the back office, he said, “was maybe a mid-tier priority in the past years. We’re really seeing this rise to the top of the priority list.”