PYMNTS MonitorEdge May 2024

How to Ride the B2B Payments Innovation Wave

b2b payments

B2B payments power trillions of dollars in annual payments flows. Much of those flows are handled via checks and other traditional processes that are riddled with pain points, redundancies and sunk time and costs.

All these factors can lead to longer DSO (days sales outstanding), adversely affecting firms’ financial health.

That’s why, with the news Monday (July 1) that accounts payable (AP) automation and procurement solutions provider Basware has integrated with Amazon Business to streamline purchasing and procurement for business customers, capturing the white space opportunity B2B digitization represents is top of mind for forward-thinking companies.

The digital transformation of the B2B landscape is only accelerating. More businesses are moving away from paper checks and manual processes toward electronic payment methods. In order to compete effectively against this evolving backdrop, firms will need to assess their own AP and accounts receivable (AR) needs, as well as those of their current and would-be partners.

Businesses that embrace this change and are able to stay ahead of the wave of digital innovation shaping the B2B landscape — particularly the AP and AR function — will be those best positioned to succeed in the future.

Read more: Interoperability and Extensibility Will Define New Era for B2B Payments

Escaping the Reliance on Legacy B2B Payment Methods

The traditional B2B payment process, often characterized by mechanisms like paper checks and manual invoicing, is fraught with inefficiencies. It involves time-consuming tasks such as data entry, error reconciliation and physical mailing, and leaves firms at a disadvantage when it comes to meeting evolving business partner expectations around greater efficiency, convenience and security.

PYMNTS Intelligence in “Getting Paid: Digital Payments for Improving Cash Flow and Customer Experience” found that 79% of B2B suppliers want to receive digital payments, including wire, automated clearing house (ACH) and virtual cards. Faster payment processing is not the only impetus, either: 76% of firms believe that buyers are likelier to pay on time when they pay electronically.

Crucially, electronic payments provide businesses with real-time visibility into their cash flow. This transparency allows for more accurate forecasting and better financial planning.

“It’s not just the visibility, it’s the real-time visibility and being able to take that data and transact and make decisions based on that data in real time,” Ari Widlansky, managing director and U.S. chief operating officer at Esker, told PYMNTS. “This is where you can unlock value across the entire invoice-to-cash experience.”

Automated payment systems can also streamline cash flow management by ensuring timely payments and reducing the risk of late fees or missed payments. This agility is crucial in a competitive market where the ability to quickly adapt to changing financial conditions can be a significant advantage.

See also: How APIs Bridge Modern and Legacy B2B Payment Architectures

Embracing Digital Transformation’s Acceleration Across B2B Payments

The digital payment landscape is continuously evolving, driven by technological advancements and changing business needs. To stay ahead of the curve, businesses must embrace a culture of continuous improvement and adaptation. This involves regularly reviewing and updating payment processes, staying informed about emerging technologies and being open to adopting new solutions that offer greater efficiency and security.

Businesses must also engage with their partners to understand their payment preferences and capabilities.

WEX Chief Strategy Officer Jay Dearborn told PYMNTS in May that bringing B2B payments fully into the digital age needs a global platform with three elements — payments, data and software — working concurrently to help simplify commercial transactions.

“The network of buyers and sellers is incredibly complex,” Dearborn said. “When I think about modernization, I’m always trying to think about our largest customers and our smallest customers. What are the use cases that payments will help them unlock, creating more ease in the way that they do their business?”

To facilitate seamless transactions, businesses should consider adopting common payment platforms that are widely accepted by their partners. Standardizing on platforms that support multiple payment methods, including ACH, wire transfers and virtual cards, can simplify transactions and enhance interoperability.

“The suppliers that are not as flexible and willing to embrace these new forms of payments are going to lose business, while the buyers who are not using them are losing revenue, which results in them not being as competitive in their space,” ConnexPay founder and CEO Bob Kaufman told PYMNTS in March.

Strategically embracing the current wave of B2B innovation will not only future-proof businesses but also help position them for sustained growth and success.