Payment Tools Find Middle Ground Between Buyer, Supplier

As more accounts receivable (AR) and accounts payable (AP) solution providers consider the other side of a B2B transaction, businesses increasingly discover that payment methods are an important part of finding middle ground between buyers and suppliers.

This week’s look at the convergence of AR and AP finds service providers exploring the use of payment tools to meet AR and AP needs. In some cases, that means taking one payment tool — like the commercial card — and using technology to ease friction for both senders and beneficiaries. In other cases, that means embracing a mix of payment rails to meet buyer and supplier needs.

Melio Explores the AR-AP Middle Ground

As more small to medium-sized businesses (SMBs) explore their options for AP technology, Melio Payments Co-Founder and CEO Matan Bar recently told PYMNTS that firms must find a middle ground with solutions that can mediate the conflict of interest between buyers and suppliers.

“Buyers and sellers in the B2B world, they do not share interests many times,” he said. “There’s a conflict of interest. A buyer wants to pay as late as possible. However, a vendor wants to receive money as fast as possible. And the interesting thing is that this conflict of interest dictates different payment preferences from each side.”

The most successful AP technologies, he said, will be those that can “decouple” buyer and seller payment preferences, enabling businesses to pay with the tools they want while also supporting the conversion to a payment tool that suppliers wish to accept in their AR department. In Melio’s case, that means being able to take a credit card payment, for instance, and move those funds to a supplier via check or other means.

Unified Payments Takes an AR Approach to AP Satisfaction

On the AP side, more businesses are seeking to use a commercial card to take advantage of capital float and rebates. Yet the largest barrier to their use of cards is on suppliers’ AR sides. Often, vendors find the process of implementing card acceptance technology and accepting interchange fees too burdensome.

There are multiple ways to tackle this problem. Solution providers like Melio can convert a transaction from one payment method to another to meet both buyers’ and suppliers’ payment preferences. Other technology players help to enable card acceptance by facilitating Level II and III processing data to lower interchange rates.

Unified Payments Group, which recently spoke with PYMNTS about this challenge, explained the current regulatory landscape in many states allows for B2B suppliers to implement a surcharge when payments are made via card.

According to Unified CEO John Perez, this strategy is an example of how an AR solution can address a major point of friction for AP.

“There are a lot of different reasons why corporate cards are being used more often, but for companies of a certain size, it’s very cost-efficient for banks to make credit available through the purchasing card environment,” he said. “They are rewarding large users of corporate cards by giving back some sort of rebate, and now you have a class of companies for which that credit card really is their operating line of credit. They need that working capital that’s available to them.”

AvidXchange Entices Investors With AR, AP Products

AP solution provider AvidXchange recently announced a $260 million funding round led by TPG Sixth Street Partners and others. With the funding, AvidXchange said it will focus on expansion and new investments in solutions for both buyers and suppliers as the company expands further beyond AP and into the AR side of transactions.

AvidXchnage first launched its supplier-focused solutions with the debut of Cash Flow Manager in 2017.

In a statement, Co-Founder and CEO Michael Praeger said “more than 60 percent of U.S. businesses still pay bills with paper checks.”

While AP technologies can be the first line of defense against manual processes and can encourage businesses to adopt electronic payments, increasingly, targeting the AR side of a transaction is also an important part of promoting B2B payments digitization.