49% of Businesses Report AR Technology Improved Collections

Delayed business-to-business (B2B) payments are a considerable source of pain for suppliers, and many are becoming more sensitive to the fact that paper-based payment methods can increase the likelihood of such aggravations. In response, companies are exploring how they can adapt their approaches to reduce these issues, with many looking beyond paper checks to speedier, digital options. 

In fact, 49% of businesses report that accounts receivable (AR) technology improved collections, according to the “Next-Gen AP & AR Digitization Report,” a PYMNTS and Transcard collaboration. 

Get the report: Next-Gen AP & AR Digitization Report: How A2A Payment Automation Can Help Improve Supplier Cash Flow 

“It’s tempting to lay all the blame for your sky-high aging balance at the feet of customers who are unwilling or unable to pay, but inefficiencies in the way your organization manages its receivables also may be contributing to the percentage of receivables that move to collections,” Transcard CEO Greg Bloh told PYMNTS. 

Accelerating Cash Flow 

Checks sent in the mail are notoriously slow to arrive and often cumbersome to process, and such frictions can prolong the compensation of suppliers for goods and services.

Corporate buyers watching their budgets may also be wary of using paper checks, as any that fail to reach suppliers on time may result in late payment penalties or bank fees to stop payment on lost checks and reissue new ones. 

Suppliers can ill afford such frictions at a time when many are coping with supply chains that have been stretched past their limit and inflation that has reached historic levels. 

Read more: US Factory Production Drops as Auto Industry Struggles 

A growing number of companies are streamlining transactions with account-to-account (A2A) solutions that can send funds and associated payments data directly from buyers enterprise resource planning (ERP) applications and bank accounts into those of recipients.

Buyers can make speedier B2B transactions to their vendors by leveraging same-day payments over the Automated Clearing House (ACH) network or immediate payments over the Real-Time Payments (RTP) network, thus strengthening business relationships. 

“Account-to-account automation eliminates manual tasks by facilitating electronic payments and the exchange of rich remittance data between [enterprise resource planning] applications,” Bloh said. “As a result, suppliers can accelerate their cash flow, reduce their unapplied cash and prevent receivables from unnecessarily moving to collections.” 

Fighting Frictions and Achieving Much-Desired Speed 

Standard ACH transactions settle within three days, meaning that vendors accepting payments this way can get money faster than they would if they waited for checks in the mail. The ACH network also offers even faster transactions via its same-day ACH option, with funds settling in recipients’ accounts on the same day that payments are sent — provided they are issued before certain deadlines 

Businesses can turn to still-faster payment tools, with The Clearing House’s RTP network offering immediate A2A transactions and enabling clients to send — and vendors to receive — funds 24/7.

More modern payment methods like these can help both suppliers and the buyers looking to better help their business partners fight frictions and achieve much-desired speed.