Why Old Accounts Receivable Systems Cost Firms New Business

There’s a reason that business processes get the “consumer” treatment, not the other way around.

And it isn’t just because the cart can’t drive the horse.

As it relates to end-user purchasing experiences, “[those of] consumers are just dramatically more streamlined than the experience business buyers have, partially because consumers have simpler needs” Shawn Cunningham, managing vice president and head of Capital One Trade Credit, tells PYMNTS.

But simpler needs don’t “make up the whole difference,” Cunningham said.

He explained that business buyers are often presented with a “consumer experience” such as the option to pay by credit card, which doesn’t always work for how businesses operate.

What businesses need for a best-in-class purchasing experience is typically longer or more flexible time to pay, more tools and information to meet their business needs, and clear, attractive terms.

“To access these, businesses have to apply, wait for approval, and it’s often a manual and clunky experience tied to the supplier’s business hours for servicing. Plus, the billing and payment application is often slower and paper-driven rather than electronic,” Cunningham said.

That’s why, in today’s fast-paced business landscape where consumer purchasing experiences are becoming increasingly streamlined, it is imperative for businesses to reimagine their business-to-business (B2B) accounts receivable (AR) processes.

Solving for the Missing Level of Simplicity

The manual and paper-driven nature of B2B AR processes doesn’t only hinder efficiency and inhibit a smooth transactional experience — it could be costing firms repeat business.

“The amount of paper that is still passed around in the B2B space continues to stun me, and it’s somewhat by choice, but more and more, I think businesses are looking for a better way,” Cunningham said. “Almost half of all businesses are spending online — and this trend is expected to continue to grow.”

He points to Amazon for Business as having gained a competitive advantage and attracted B2B customers away from traditional suppliers — growing to $35 billion in business transactions along the way — in part just by offering them a simple and easy buying experience.

Supporting that streamlined B2B experience, Cunningham said, are features such as instant decisioning for credit approvals, extended terms up to 60 to 90 days and a one-click experience for purchasing, on-demand invoices and details of everything purchased.

“They’re providing that control and visibility into the purchase and payment process, the things that are really unique and needed for that business customer,” he said, emphasizing that Amazon’s sales aren’t incremental — they’re coming from suppliers that aren’t providing as optimal an experience.

Particularly in an uncertain economic environment, minimizing the risk of losing existing customer business      is crucial for enterprises looking to sustain a healthy level of growth.

Legacy Processes Pose Risks and Inefficiencies for Suppliers

To adapt to changing expectations and behavioral drivers, businesses need to  transform their AR processes.

“When you start thinking about the evolution and the revolution in AR, manual and clunky B2B AR processes are just a danger to how suppliers are doing business,” Cunningham said.

Various solutions exist to help businesses transform their B2B AR experience. AR automation software offers technology to streamline the order-to-cash process, including digitizing bills, enabling online payments and automating reminders and payment processing.

“Most B2B suppliers are also dealing with structural problems related to cash flow and the risk of nonpayment. These issues can be exacerbated in times of change toward online or more customers that they do not know. When customers extend payment terms out to 30, 60, or 90 days, suppliers have to wait to get paid, putting a lot of pressure on their cash flow,” Cunningham explained.

Another option is full-service AR solutions that manage the entire accounts receivable process, from credit decisioning to funding, risk protection, billing, collecting and servicing. Businesses that successfully implement full-service B2B AR solutions enjoy a transformed process, eliminating manual inefficiencies and optimizing cash flow. The supplier maintains control while saving time and providing customers with an enhanced experience and tools that were previously unavailable.

“A full-service AR solution can transform a manual, clunky in-house program into one that is tech-oriented, digital-first, and automated,” Cunningham said. “While also improving a merchant’s cash flow and protecting against the risk of non-payment.”