CFOs Take Recession Fight to Accounts Receivables

Economic uncertainty has heighten the need for accurate CFO revenue forecasting needed for corporate strategy.

At the heart of this increased appetite for precision are the predictive elements that exist within accounts receivable (AR) and accounts payable (AP) data as efficient, consistent payment processing makes it much easier for CFOs to deliver on-target financial projections.

“Forecasting is a very, very difficult thing to try to manage any way, especially because of how business ebbs and flows,” said Matt Tinsley, a shared services analyst at medical supplies manufacturing service Natus, in a recent interview with PYMNTS.

In acknowledging that B2B payments modernization is essential for long-term financial success, Tinsley said it was one of the reasons why automation was so critical, noting that it gave finance teams a good baseline of performance.

“When you’re relying too much on the human factor, that’s what can negatively impact your performance or your forecasting figures,” Tinsley added.

At the same time, the inverse is also true, in as much as erratic payment processing times or non-intuitive payment tools not only slow incoming revenue and disrupt financial models, which in turn make it harder for executive teams to pinpoint and reach financial goals.

The ‘Payments as Usual’ Problem

While accurate AP/AR data is essential for financial forecasts, creating those seamless payments management processes is not without its own challenges.

One reason, according to Billtrust CEO Flint Lane, is that many businesses are still using legacy systems and paper checks. These “old ways” of sending and managing payments can make AP/AR processes hard to manage and a challenge to improve.

“[Paper checks will] continue to decline, and with the continued invention of better mechanisms to deliver electronic payments, that decline will accelerate,” Lane said in a conversation with PYMNTS in November. “There will not be a complete disappearance of paper checks  unless the post office starts charging much more for postage.”

The Big 4 Frictions

PYMNTS research found that in 2022, 93% of businesses planned to try at least one new payment method at a time when 85% of CFOs said they had already increased their use or acceptance of digital payments.

This is a response to key payment frictions that tend to limit a CFO’s ability to accurately forecast revenue. These frictions include:

The cost of creating and sending invoices: Some B2B buyers may use portals that require manual invoice entry. As businesses scale, resource expenditures to process invoices do as well, which eats into revenue and also makes cost predictions hard to gauge.

Negotiating payment preferences: Suppliers often want fast payments, but buyers frequently prefer more time to pay. This can impact suppliers’ ability to estimate outgoing payment clearing times and quarterly revenues.

Reconciling and posting payments: The complexity of managing payments manually grows alongside increases in volume. That means as businesses grow and and more transactions, costs will rise and existing staff may be overtaxed.

Navigating new portals and unstructured formats: Buyers that use new portal-based services and or submit invoices using unstructured data can slow suppliers’ ability to send, manage and track invoices.

According to recent PYMNTS research, CFOs are now looking for comprehensive AP/AR solutions that integrate payments processing with invoicing management. New options, such as digital lockboxes which consolidate AP/AR data and offer real-time payments visibility, are among the tools companies are using to modernize payments.

Fixing AP/AR Can Support Fiscal Resilience

Taken together, AP/AR systems that automate common functions have been shown to solve scalability issues for buyers and suppliers. At the same time, when CFOs have visibility over AP/AR, they can optimize cash flow more easily, according to Lane.

Other attributes to look for in an AP/AR solution should include visibility of invoice delivery across physical and digital channels. This ensures that AP/AR data is comprehensive and fresh, and available to serve as a single source of truth for ERP and CRM decision-making.

Another important feature to seek out: digital lockboxes. Digital lockboxes allow AP/AR teams to manage decoupled remittances at scale, including paper checks.

Lastly, the integration of simple application programming interface (APIs ) can also help rapid payment processing, provided the connection between buyers and suppliers is, indeed, simple and seamless.

AR as Growth Engine

If done right, AR strategy can play a part in delivering revenue visibility and growth, according to Tinsley.

“The other critical piece of effective AR management is forecasting. If you don’t have a solution that allows you to accurately forecast, it makes things much more challenging when you look to grow.”

Learn more about Reimagining Business Payments