Deep Dive: How Integrating Embedded Payments, A2A Into ERPs Can Give Firms A B2B Payments Advantage

Chief financial officers (CFOs) and other payment professionals are scrutinizing their accounts receivable (AR) and accounts payable (AP) operations with an eye toward innovation as frictions associated with manual processes increase.

One study found that about one-quarter of AP professionals’ working hours are spent on tasks that should be automated, representing a waste of organizations’ money as well as time.

The hunt is on for solutions and technologies that can help streamline B2B payments, from automating historically cumbersome processes, such as invoicing or data collection, to researching newer, speedier payment methods. Interest in real-time payments or account-to account (A2A) for AR and AP transactions is rising, as is the use of automated clearing house (ACH) transfers, with Nacha reporting a nearly 29 percent bump in the number of B2B ACH payments from the second quarter of 2020 to Q2 2021.

Other companies are looking to embedded solutions to make their B2B payments more efficient, but it is essential to consolidate these emerging technologies in a single platform that offers a transparent view of all data. Reliance on siloed systems to conduct different types of transactions or manage vendors and business partners simply will add back the complexity and time companies are attempting to reduce.

The following Deep Dive explores how enterprise resource planning (ERP) systems can provide a platform for smoother AP and AR processes while also supporting emerging B2B payment use cases, such as A2A and embedded payments. Pairing ERP with other technologies, such as the cloud and automation, could bring further benefits to companies as they look to innovate their B2B payment operations.

ERP as the Payment Innovation Linchpin

Financial professionals are keenly feeling the need to improve their payment processes, with PYMNTS research showing that 93 percent of CFOs are in the midst of digitizing their organizations’ accounting operations. This trend reflects the increasingly severe consequences of lagging payments and outdated infrastructure on firms’ business relationships as well as their own bottom lines.

Another survey of CFOs found that 51 percent admitted they were struggling to meet deadlines due to overwhelmed processes, while a separate report noted that payment executives typically cite AP processes as their most paper-laden and labor intensive functions.

The pressure clearly is on for organizations to innovate both AP and AR processes for smoother experiences, but this requires that CFOs and other decision-makers upgrade several of the steps and features involved for greater efficiency. Offering instant payment methods such as A2A transfers, which move funds directly from one bank account to another, could alleviate some of the frictions inherent in historically manual B2B payment processes, such as needing to wait for check deposits to clear. Businesses also must be sure they can transfer the attached payment and client data just as swiftly as they can the actual funds in order for A2A or other instant methods to work as intended.

Pairing A2A or embedded payments with an ERP system is one way businesses could solve both friction points, offering swifter solutions to clients while being able to manage attached details seamlessly on the back end. ERP systems are receiving more attention as AR and AP professionals look to upgrade these processes, with 79 percent of companies claiming that ERP integration is one of their organizations’ highest goals.

Transparent payments quickly are becoming table stakes for companies to stay competitive. Businesses are shifting their invoicing tools to virtual methods and are relying upon online databases and workflow platforms to support faster payments and more satisfactory relationships with their clients. Integrating embedded or A2A payments within ERP systems therefore should be a top priority for companies across industries.

ERP and the Future of Payments

Keeping up with the changing payments needs of partners and vendors is critical for organizations as the future of work becomes both more virtual and more global. Cross-border payments make up a growing percentage of B2B transactions, meaning that more businesses will need to factor issues such as changing foreign exchange (FX) rates, international data privacy laws and financial compliance guidelines into their payments processes. Being able to collect and manage all this information in one repository while also facilitating near-instant payments could grant companies a key advantage over others as they look to compete on the expanding global stage.

Companies must remain vigilant about how payments trends are changing and how ERP and other solutions can help them keep pace with these developments. Creating and retaining business relationships depends on the ability to pivot swiftly to match partners’ new expectations. Transitioning historically manual processes to digitally enabled solutions rapidly is becoming a must.