Finance Leaders Invest in Modernization, Take Aim at ‘Technical Debt’

B2B payments modernization

The B2B payment landscape is in the midst of a pivotal migration toward modern solutions.

This, as decades-old legacy platforms and historically siloed finance office operations are creating a mounting technical debt that negatively impacts business planning and development cycles, hinders speed to market, as well as strains B2B ecosystem relationships with accounting and bill pay solutions that talk past each other.

As industry standards and B2B engagement expectations continue their rapid evolution, marketplace observers have noticed that legacy systems are struggling to keep up.

Fortunately, a revolution driven by technologies that create a better future for finance and accounting leaders is just around the corner, as integrated and automated solutions are increasingly taking center stage — catching the eye of savvy CFOs who are prioritizing modern operational investments to drive sustainable growth.

Identifying and Resolving Technical Debts

In an earlier piece, PYMNTS covered how “archaic” and “failing vintage” systems are sowing chaos across the U.S. airline industry — and how they are shining a light on the need to bring company operations into the 21st century.

Having a modern operational foundation capable of leveraging the latest technology makes a business nimble and properly equips them to respond appropriately to macro, and micro, changes while consistently delivering value for their business partners and customers.

PYMNTS recently wrote about the three “R” words more than two-dozen surveyed organizational leaders see as being important for 2023. They were: recession, relationships and real-time.

Businesses looking to productively transform their B2B operations might want to consider adding a fourth “R” word — that of “retiring” or “replacing” their legacy systems with digital alternatives.

Flexible, modern B2B payments solutions can help businesses weather the recession, build long-term relationships that accelerate value and growth, and enable real time access into working capital and cash flow needs via greater transparency over payables and receivables.

Alexandra Johnson, head of innovation at Bank of America, wrote in the new PYMNTS eBook, “Focusing on the continued expansion of real-time and faster payment offerings, including payment choice and account validation, will give businesses confidence in moving money and transacting regionally and across borders.”

Open banking and interoperability between payment schemes will be key, she added.

Indeed, PYMNTS research in “The AR Transformation Solution: Easing And Accelerating Payments From Business Customers,” finds that B2B accounts receivable (AR) and accounts payable (AP) automation is allowing businesses of all sizes to realize critical cost savings and efficiencies by removing common manual errors, smoothing over payment choice and customer validation frictions, while at the same allowing for greater throughput — all of which helps drive cash flow certainty and increases business profitability.

“Payers and payees want to know where their funds are, and when they will arrive,” Bank of America’s Johnson said.

Legacy systems that can’t provide this key information to organizations at speed will find themselves soon retired and replaced by next generation digital alternatives.

B2B Digitization

Dean Leavitt, founder and CEO of financial technology company Boost Payment Solutions, sees the emergent migration of B2B to digital as already being well underway.

“We have seen a growing understanding and acceptance of the need for digital payments. This is a new frontier for enterprises of all sizes and a huge opportunity for digital payment facilitators who are focused on creating improved experiences for buyers and suppliers,” he told PYMNTS.

By optimizing efficiencies across the B2B payments journey by embracing digitization, organizations can avoid common historical pitfalls and friction points.

“If you have to go offline to send a check or deliver an ACH then you have lost the value of speed, automation and, perhaps most importantly, the data,” Leavitt said.

CFOs are increasingly realizing that there are better ways to operate. A recent PYMNTS study, “Improving Financial Performance: The Speed Of Spend Management System Adoption,” found that 84% of firms are interested in automating non-payroll spend management.

Helping accelerate this digital transformation, market infrastructures around the world are set to move to a new language, ISO20022, on March 20.

The universal financial industry message scheme will mean that payment messaging is no longer limited by field lengths, allowing B2B clients settling multiple invoices with one payment to carry that information to their business partners’ accounting office much more efficiently, ensuring fewer reconciliation headaches and bottlenecks and freeing up usable cash faster.