How A2A Payments Can Help Businesses Ease Their Cash Flow Pains

Cash flow has become a paramount concern for businesses trying to withstand the pandemic’s effects, and companies from all sectors are grappling with operational disruptions. Many B2B firms are seeing their days sales outstanding (DSO) mount as clients struggle to pay bills, prompting suppliers to find ways to cope when clients’ payments do not arrive on time. Many suppliers are finding it more difficult than ever to retrieve and process customers’ paper check payments while staff members are working from home, adding time and friction to the accounts receivable (AR) process.

Businesses facing such issues are calling for greater digitization of the B2B payments space, said Pascal Yammine, general manager and senior vice president of business software and customer relationship management solutions provider Salesforce Revenue Cloud. He told PYMNTS during a recent interview that more and more companies are looking to abandon paper checks and adopt swifter, more convenient account-to-account (A2A) payment methods — especially for recurring transactions.

The Pandemic-Driven Cash Flow Crunch

It is undeniable that businesses are facing increased financial strains during the pandemic. The U.S. Chamber of Commerce found that 80 percent of small to medium-sized businesses (SMBs) “felt comfortable with their current cash flow” in Q1 2020, but just 59 percent said the same at the start of Q2 2020. Yammine said that cash flow has thus become a top-of-mind issue for businesses.

“The number one thing we hear [from business clients] is cash flow: ‘What is the fastest way for us to get the cash out of customers’ banks to pay for services and the value provided?’” he said. “The average DSO for businesses has increased in the past several months.”

Such problems are becoming an increasing concern for firms, and managing cash flow can be even more onerous when they must wait for checks in the mail or send staff to retrieve paper-based payments from lockboxes and offices.

“Some functions have almost always been officed-based — like finance and accounts receivables,” Yammine explained. “Handling manual payments when … working remotely is a much harder thing. In order to allow [staff] to work from anywhere, which is more important now than ever — that has an impact on how [businesses accept] payments.”

Making The Digital B2B Payments Shift

These issues are prompting B2B companies to quickly shift their AR approaches, Yammine said, and more firms are encouraging their clients to use fast digital payment methods instead of paper checks. He noted that suppliers are especially interested in secure, automated payment collection methods, including the ability to pull funds directly from clients’ bank accounts. The shift to replacing paper-based payment flows with secure, swift A2A transactions appears to be well underway, with B2B ACH payments volumes rising as check volumes decline.

A2A payments can help businesses receive their funds more quickly and easily, and thus improve cash flow, but suppliers must often take additional steps to ensure smooth payment experiences for their clients. Making the most out of ACH payments requires suppliers to streamline client onboarding — a process that typically involves collecting bank details and then charging token amounts so that suppliers can confirm the pull payments went through.

Successfully completing this onboarding ensures that future automated transactions will go smoothly, but the number of initial steps involved can create inconveniences that discourage companies from using A2A as broadly as they would otherwise. This initial onboarding effort could prompt some firms to continue using paper checks for one-off transactions and reserve A2A methods like ACH for recurring payment arrangements.

“ACH is pulling from the buyer, so [these transactions] are fast and reliable for [the] most part; they’re pretty quick,” Yammine said. “The problem with ACH in [the] B2B world is that the first payment is always a problem. The first approval is the one that takes more time.”

Third-party payment platforms and networks that can act as intermediaries to streamline A2A payment acceptance can help tackle such frictions, however. Simplifying A2A payments — especially onboarding — will help bring digital payments into the B2B space to an even greater extent as suppliers look to better manage cash flow.