Even Digital Businesses Struggle With Paper-Based Vendor Payments

Companies with a long history have many advantages, but being digitally native isn’t among them. CFOs assuming their responsibilities at such companies often face the daunting task of digitizing payments, inheriting what amounts to a paper-laden desk.

Not so for those fortunate enough to join digitally native companies like Klaviyo, a decade-old firm that began as a database company and evolved into a marketing platform that helps business use email and SMS messaging to drive revenue.

Amanda Whalen, new CFO at Klaviyo (pronounced clay-vee-oh), told PYMNTS that while she inherited a position that might well be the envy of her peers, there’s still much work to do to perfect the systems already in place to prepare for what the future holds — including growth and a potential future as a public company.

According to Whalen, the firm’s database-driven roots set the tone for everything else, including payments.

“That did extend to our approach to [accounts payable] and [accounts receivable] in terms of how we bill customers and pay vendors,” she said. “Our philosophy is all about how to take human interaction at internet scale and digitize the relationship that a brand might have with their customers, and we apply that same principle of how to take all the great things that come in a personal relationship and apply a digital mindset to them.”

Whalen said the company has a team of engineers dedicated to supporting the CFO function. This includes a team of data scientists who work with her on forecasting. The firm is a good example of one of the principal benefits of digitizing — the data stream that accompanies financial transactions can be used not only to make forecasting more accurate, but also to provide actionable insights across the C-suite that facilitate growth.

For example, companies can calculate customer lifetime value to gauge optimal marketing spend, determine the characteristics of customer segments by churn rate, and assess how to maximize recurring revenue.

While Whalen inherited a relatively clean desk due to the firm’s receivables and payables automation, her day is laden with challenges. As the business grows, it evolves, adding new products and services.

“We launched SMS last year. That comes with learning to build for multiple products. So, what we’re continually doing from a finance standpoint is looking at all our core processes — record to report, order to cash, procure to pay — identifying the manual steps in those processes, and where we can take those manual steps out and automate them.”

Make or Buy

Whalen says the corporation is currently of implementing five to six major new systems across the finance function. And while Klaviyo has strong systems engineering capabilities in house, it does not reinvent wheels.

“We didn’t build a new [enterprise resource planning system] from scratch. We went with an established procurement system,” she said, naming one example. “Where we are more customized in house is using data scientists to really understand what drives the customer to stay.”

Whalen has been able to keep payments automated for large and small customers alike. For larger, mid-market plus customers, the firm operates a deal desk. One of the systems she’s putting in place this year is a more advanced billing module within the corporate enterprise resource planning (ERP) to automate customized billing for larger customers.

While there are some industry concerns that rising interest rates’ impact on the time value of money may slow AP velocity, Whalen says that’s not the case at Klaviyo.

“You have the same forces going in each direction over time almost regardless of what’s happening with interest rates. Klaviyo is simply focused on paying suppliers in full and on time, so rates haven’t had a tremendous impact on digitization.”

For all PYMNTS B2B coverage, subscribe to the daily B2B Newsletter.