A world without supply chains would look nothing like the one we know today. But a world without streamlined payments throughout that supply chain is just the world we live in.
There’s an all-too-common disconnect between highly automated, efficient supplier streams and the very manual, paper-heavy accounts-payable (AP) processes used to pay those suppliers. This has led to a broken system, to the point where 61% of companies cite rising supply-chain management costs as their number-one challenge. A further 50% say that one in 10 payments to suppliers goes out late due to manual processes, placing further stress on relationships with key suppliers.
That stress has real business consequences.
A full 97% of organizations are still making check payments to a portion of their suppliers, according to the 2019 AFP Electronic Payments Survey, and those payments are more vulnerable than any other type to fraud and costly mistakes.
The reputational damages of fraud and the cost of slow, antiquated payments can undermine all the work companies have done to modernize their supply chains and delight suppliers.
There are better ways forward, however. In an industry where maintaining a healthy supply chain is crucial to preventing business interruption and related losses, paying suppliers on time and in their preferred format can strengthen those relationships and ensure an unbroken supply chain. Such benefits, plus reduced costs and inefficiencies for organizations making payments, are the reasons why so many AP departments are now focusing on automating invoice-to-pay processes.
A revolution for back-office processes is just as important as the one already underway for manufacturing production, and that starts with AP automation.
With the right financial technology or bank partner in place, the transition to payment automation is much less daunting than automating and streamlining a supply chain. The ideal solution allows the AP department to leverage existing accounting systems and bank relationships, to streamline and digitize everything from invoice receipt through payment across the supply chain. With the right payment mix, suppliers can realize benefits from the convenience and flexibility of virtual card or automated clearing house (ACH) payments. What’s more, the organization can benefit from a new source of cash via rebates earned on these transaction types.
The ability of suppliers to streamline receivables process and get faster access to cash is a byproduct of the right payables process. Organizations that transition to electronic payments can offer greatly enhanced remittance data in their suppliers’ preferred formats, including Corporate Trade Exchange (CTX), custom accounts receivable (AR) files, and emails. Those conveniences make it much easier for suppliers to apply cash when electronic payment is received, and enables enhanced AR reporting capabilities, adding value to the buyer-supplier relationship in a way that’s not possible via checks alone.
It doesn’t take a long time for electronic payments to show ROI for organizations, either, as the costs associated with implementing digital payments are often offset by earned rebates, savings from automating key processes, and efficiencies gained by having key staff spend less time on manual tasks.
Perhaps the biggest benefit for both payer and supplier is the fact that better payment security comes with AP automation. Electronic, auditable invoice receipt and approval workflows help prevent or provide visibility to fraudulent invoices. Electronic payments carry the advantage of being much more difficult to alter, re-direct, or otherwise be exposed to fraud. In the case of virtual card payments that utilize a one-use number for an exact amount, the chances of a payment being intercepted dwindle even further.
A sophisticated payments partner should have built-in monitoring that can identify threats, stop unauthorized movements of funds, and maintain sensitive supplier bank information in a secure manner, so the organization doesn’t have to. Given the very real and very heavy costs associated with fraud — and given that most businesses report at least experiencing a fraud attempt in the last two years — these are no small advantages.
Considering all the benefits of AP automation, why is adoption not more widespread? As is the case with most significant changes, it has a lot to do with perceived costs, misconceptions around the difficulty of implementation, and inertia around current processes.
In fact, the top concerns from AP staff typically revolve around the cost and time associated with implementation. Here, too, AP automation solutions have become sophisticated enough that lengthy, IT-intensive rollouts are becoming a thing of the past. They have cut down the time between committing to a solution and realizing its benefits.
With the technology and business intelligence available today, the business payments that fuel supply chains can be as digitally transformed as other pieces of supply-chain operations. The pressure to lower costs, protect the business from fraud, and streamline everything done on a daily basis points to one clear solution: a digital transformation of the AP processes.
Bill Wardwell is vice president of strategy and product with Bottomline Technologies.