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Why is the Supplier Experience Important in Payment Automation?

supplier

Why is the Supplier Experience Important in Payment Automation?

It’s a difficult time to be a supplier. As companies conserve cash amid difficult economic conditions, suppliers are often the ones who feel the financial strain. Payment terms get extended. Buyers seek to renegotiate contracts to optimize their processes and adapt to new solutions. But then their suppliers are left out of the discussion until they’re presented with their marching orders.

Even though a company’s first responsibility is to its bottom line, it cannot afford to forget that suppliers are ultimately responsible for their ability to deliver revenue. It’s especially important right now that companies take care of their suppliers for the supplier’s benefit as well as their own.

Nightmare Scenarios

If suppliers don’t get paid in a way that works well in their processes and systems, it causes many nightmares for their accounts receivable team. Those nightmares can spread throughout the organization, causing stress and frustration. That frustration sometimes manifests as a conflict between buyers and suppliers. In my prior finance roles, I saw my fair share of suppliers who went to great lengths to make their dissatisfaction known, from verbally assaulting my unsuspecting colleagues to threatening lawsuits.

When suppliers go to these lengths, it’s because they’re desperate for action on the buyer’s part. In today’s environment, their distress is twofold. Payment amounts that seem negligible to buyers make a significant difference to suppliers. The constant flow of payments from AP to AR teams has slowed as companies conserve their funds as long as possible. The ebb and flow of this process has always been present—it’s how many companies do business. But this year, suppliers are feeling the strain more than usual.

Increased Collection Pressure

In 2001 and during the Great Recession, we saw that when the economy struggles, finance departments add aggressive collections specialists to their accounts receivable teams to collect overdue money from their customers, relationships aside.

In my experience, AP people are helpful, conscientious, and tough. They have to be, as the liaison between their company and its suppliers. Right now, they’re on the front lines, battling to conserve cash. If past downturns are any indication, they’re currently bogged down with calls, and morale is dipping as the number of irate callers spikes. What’s worse, that stress and emotional exhaustion can cause high turnover rates, which in turn leaves companies in a constant state of training new-hires—a drain on already-limited resources.

From a strategic standpoint, if you’re not getting payments to suppliers in a way that’s conducive to their operations, they could go out of business. They might also choose to stop working with your company altogether. To them, not all customers are ideal, and as more of them abuse the “customer is always right” notion, suppliers have to withhold the benefit of the doubt and act in self-preservation.

I’ve experienced both positive and negative aspects of the financial battle. On the one hand, I’ve negotiated with large retailers who ground businesses down to the thinnest margins. Smaller companies who rely on their enterprise customers to stay afloat are often forced to accommodate them, knowing that they are expendable and replaceable. Conversely, I’ve worked with a global manufacturer that valued its supplier relationships and would only offer early payment discounts and supply chain financing if they knew it would benefit the supplier. This company holds stress-free, decades-long relationships.

When suppliers don’t get paid on time, they may decide to deprioritize the offending customers. By becoming a nuisance in their process, your supply chain could feel the impact. Ultimately, this translates to your inability to generate revenue.

Buyers Care

Fortunately, more companies seem to value their supplier relationships than not. I recently participated in a third-party study to understand what potential payment automation buyers value the most about adopting such a solution. Supplier experience took the third spot after efficiency and fraud protection.

Supplier experience appears in our buyer persona research too. When I meet with customers, they want to ensure that we treat their suppliers well. It’s not only part of the company culture they wish to instill in all of their relationships, but they also worry about the impact on their AP team and the supply chain if something goes wrong. They understand any economic impact on their suppliers ultimately translates to higher prices.

Supplier Experience Now

Supplier experience has always been a crucial part of our value proposition as a payment automation solution, and why we continue to focus on building upon the improvements we have already implemented.

We have a dedicated team that supports suppliers on behalf of each customer. Because many customers share the same suppliers, we act as the main point of contact for all of them, which reduces the number of touchpoints a supplier must make to resolve payment issues or update contact or financial information. At the same time, we’re flexible. Some of our customers have invested deeply in their supplier relationships, and they still prefer to be involved in communications. In those cases, we don’t have to be the single point of contact. Suppliers can contact us or their customer’s AP team—whichever suits them.

For suppliers with hundreds of customers in our network—which is common in verticals such as automotive, construction, and technology—we even offer consolidated payments. For example, we combine all their incoming payments into one deposit and supply a data-rich file for easy reconciliation, right down to the customer and invoice level. This data is delivered either through our payment portal or by email.

Creating a Satisfying Experience

At Nvoicepay, we’re always looking at new methods for supporting customers and suppliers alike. It’s our goal to offer better payment products, faster payments, and more real-time data. Our most valuable report cards take supplier opinions into account, and we are proud to consistently receive satisfaction ratings above 98% from the suppliers who interact with us.

Buyers have immense power over suppliers, and sometimes they press that advantage hard. As a payment automation provider, we advocate for and support our customers—the buyers. However, we have found that supplier advocacy results in measurable success for all parties involved.

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Josh Cyphers is the President of Nvoicepay, a FLEETCOR Company. For the past 20 years, Josh has managed successful growth for a variety of companies, from start-ups to Fortune 100 companies. Prior to Nvoicepay, Josh held leadership roles at Microsoft, Nike, Fiserv, and several growth-stage technology companies. Josh is a lapsed CPA, and has a BS in Economics from Eastern Oregon University.

payment

Survey Finds Dramatic Increase in Overdue Payments in North America

Will North American businesses remain resilient in the face of COVID-19 challenges? That answer is increasingly difficult to answer in the affirmative, as virus containment measures continue to negatively impact trade, consumer spending, industrial production, unemployment, corporate debt and supply chains.

According to the annual Payment Practices Barometer survey of businesses in the U.S., Mexico and Canada by trade credit insurer Atradius, companies are facing widespread cash and liquidity pressures. Survey data was collected this spring, and conditions have likely deteriorated further. News recently broke, for instance, that the coronavirus caused the U.S. economy to contract 32.9% in Q2, the worst contraction in modern history.

Needless to say, the bleak economic outlook puts businesses in an extremely tight spot, and it is likely insolvencies will rise dramatically, further exacerbating liquidity challenges among organizations in the supply chain. Some troubling signs of deteriorating payment practices and B2B customer credit risk captured in the survey include:

-Overdue payments have increased dramatically. Across the region, 43% of the total value of issued invoices remain unpaid by the due date, a sharp increase from the 25% reported last year.

-The value of invoices overdue by 90 days or more has doubled to 13%.

-Businesses write off 4% of the total value of outstanding invoices, up from 3% in 2019.

The increase in payment defaults is particularly alarming in the U.S., which saw a 72% year-over-year uptick compared to 2019, and in Canada, which saw an 86% increase. In Mexico, the amount of trade receivables firms have written off has doubled since last year.

These trends put a troubling burden on businesses, which end up having to spend more time, resources and funds chasing down overdue invoices. It also means working capital is tied up for longer than before, limiting businesses’ abilities to pay their own suppliers and make strategic investments. In short, rampant late payments cause a bad domino effect, spreading liquidity issues all throughout the supply chain.

UMSCA Firms Are Tightening Credit Controls

Faced with heightened B2B customer credit risk, many businesses across North America are tightening their credit control procedures, the Payment Practices Barometer found.

Firms typically rely on a mix of outsourced risk management, such as credit insurance, and internal tactics such as reducing risk concentrations and increasing debt collection resources. Notably, more than half of the region’s survey respondents plan on upping the efficiency of their debt collection processes through tactics such as payment reminders or outsourcing collections to an agency.

The Payment Practices Barometer also found that while credit-based B2B sales are on the rise across the region, the trend is slowing. Self-insurance against the risk of payment defaults also saw an increase – 66% of businesses rely on this tool compared to 22% last year.

The most prevalent methods of credit control vary by country:

-Many Canadian firms are planning on adjusting payment terms to better align with the credit capacity of customers – average payment terms are now 26 days, compared to 27 days in 2019. They also widely employ payment reminders and work to avoid concentrations of credit risk.

-In Mexico, a significant proportion of businesses employ credit insurance. Additional popular credit management tactics include suspending deliveries until outstanding invoices are paid, requesting payment on cash from B2B customers and requesting payment guarantees.

-U.S. firms focus more on credit management than their peers in the region. A large majority of U.S. businesses manage customer credit risk in-house through self-insurance. Requiring payment guarantees prior to sales and offering discounts for early payment are also widely used tactics.

UMSCA Businesses Remain Hopeful?

Despite the bleak economic outlook and all signs pointing to widespread liquidity issues, the majority of businesses surveyed in North America predicted growth in the coming months, their optimism rooted in the belief that banks will continue to provide credit to cushion the effects of poor cash flow.

But again, that was a few months ago, and business conditions are rapidly changing for the worse. Consumer sentiment, for instance, has fallen back almost as low as in the early days of the outbreak – optimism that COVID-19 will go away any time soon is now a distant memory.

The only thing that can be said for sure is that the business environment in North America is rife with uncertainty with no indication of sunnier skies in the near future. More than ever, businesses need to take a strategic approach to credit management that ensures adequate cash flows and a solid liquidity position.

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Gordon Cessford is the president and regional director of North America for Atradius Trade Credit Insurance, Inc

contracts

Don’t Get Caught Off Guard by Expired Contracts

Contracts are key to mitigate risk, secure discounts, and acquire services. Your procurement teams work hard to negotiate contracts that enforce the most beneficial terms for your company, and your AP team takes careful measures to ensure each invoice is paid on time. However, one section of the contract that’s often overlooked by finance teams is the expiration date. Surely your supplier will let you know when it’s time to renegotiate, and someone’s tracking it somewhere, right?

The truth is, in many organizations, the expiration date of a contract is often completely unknown. An expired contract can have serious ramifications to your business functions and could cost you a lot if you’re unaware of its pending arrival. Below are a few scenarios that can happen if you’re caught off guard by expired contracts.

Where are our contractors?

If you fall out of contract with your contractors, the first thing you might notice is that they simply don’t show up. This may not be a huge issue on temporary projects such as landscaping, but if you’re relying on them for long-term IT support, this could be a big issue: A few weeks of contract renegotiations can slow down your business significantly. Staying ahead of contract expirations allows you to renegotiate terms before they expire, to ensure there aren’t any gaps or delays in your projects.

Hmm, this seems more expensive than usual

If your supplier contracts expire, they’re no longer obligated to honor the price you negotiated. They can suddenly begin to charge their market rate, which is likely substantially higher than the contracted rate. This would be an unwelcome surprise for any finance team, especially if it’s after you’ve already purchased the goods (and perhaps even used them as components within your product). After a contract is expired, you lose all your leverage to find an alternate supplier, and the cost of your goods can rise exponentially. Avoid this supply chain nightmare by knowing in advance if you need to renegotiate your prices.

I can’t afford my new subscription price, but can I afford not to have it?

Contracts often include a clause that limits cost increases upon renewal, typically around 3-5% or covers the cost of inflation. However, if the contract expires, this clause will no longer be honored. Let’s say your business is using an ERP or CRM software on a six-year contract. During that timeframe, the software company raised its annual fee from $400K to $3.5M. Unfortunately for your company, you didn’t renegotiate the contract before expiration, and you now have zero leverage to negotiate a better price. Even worse, the cost of switching may be equally high, so it doesn’t make sense to look for alternative software. Your company has no choice but to pony up the money in order to keep your business functioning on all cylinders.

The above scenarios would be tricky for any business to avoid. With so many contracts with so many different suppliers, it can seem impossible to be aware of each upcoming expiration date. However, AppZen’s Contract Audit notifies you of all of your upcoming expirations (and coupled with AP Audit, you can also be confident that your contract terms are reflected on each invoice too). Thanks to AppZen, you’ll be notified with enough time required to make a decision on alternative suppliers, saving you costly mistakes, and keeping your business and supply chain running at 100% efficiency.

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David Wishinsky is a Senior Product Marketing Manager at AppZen.

payment

The New Business Case for a Powerful Payment Solution

Back in 2009, when my co-founders and I started Nvoicepay, there was very little technology in the market to help companies make supplier payments efficiently. Banks were the only game in town. Companies were still making a very high percentage of their supplier payment with paper checks, using painful manual processes. The fintech revolution was getting underway, and we were starting to see tech companies begin to deliver innovations in consumer payments—think Venmo, Apple Pay, etc.—and these quickly gained mass adoption.

Business payments are far more complex, and we’re still not at mass adoption, but the market is picking up steam. There are now several strong suppliers in the market, and investment continues to flow into B2B payments tech. As a result, the move off of check payments is accelerating. According to the 2019 AFP JP Morgan Electronic Payments Survey Report, organizations on average make 42 percent of their supplier payments by check, down from 50 percent in the prior year. This is the biggest drop we’ve seen in several years.

As all this happens, the business case for B2B payment solutions is becoming stronger and multi-dimensional.

Efficiency at the core

Process efficiency remains a core feature of payment automation. It enables an accounts payable organization, which could be making tens of thousands of supplier payments a year, to automate the workflow of making payments of any type—card, ACH, wire or even print check—using cloud-based software and services.

Software automation provides the customer control over the payment, visibility as the payment clears, and complete traceability if they need to access the payment history. But payment services are critical to creating efficiency in accounts payable.

A large portion of accounts payable’s time is devoted to unwinding payment errors and resolving payment exceptions. A single payment error can take 20-30 minutes or longer to resolve; even with a low error rate, most accounts payable teams are dealing with hundreds of errors every month. Payment service providers take that piece off their plates completely and that’s a huge efficiency boost.

These services also address the historic barrier to electronic payment adoption: the labor of reaching out to each supplier to determine how they want to be paid, where the remittance information should be sent, and—if the supplier wants to receive ACH—to collect their banking data and securely store it. Accounts Payable teams working with thousands, or even tens of thousands of suppliers, just don’t have the headcount to do that level of outreach.

Fraud protection and continuity

As enterprises have shifted toward electronic payments, we’ve seen an uptick in ACH fraud. Organizations have become accustomed to dealing with check fraud, and banks usually offer Positive Pay and Positive Payee services to combat it.

ACH fraud is a whole different animal. It’s cybercrime, and prevention requires sophisticated technology and controls, and ongoing employee training. It’s a lot more than most companies can do on their own, but a payments solution provider has the scale to offer extensive security services to all of its customers, and to assume that risk on their behalf. Fraud protection adds another very significant dimension to the business case.

With the global pandemic, many accounts payable teams are still working from home, where it is almost impossible to produce paper checks in a safe, secure, repeatable way. Paying by check was expensive and time consuming before the pandemic, but now the problem is acute. It’s incredibly difficult to approve invoices and make payments by paper check when your accounting staff is spread across their home offices. You literally have to drive paper from place to place to get approvals and signatures. Payment automation gives accounts payable the visibility and control they need to do remote payment approvals from home, making business continuity another dimension of the business case.

Now we’re heading into a severe global economic downturn. Businesses are pivoting to reducing costs, and checks cost a lot—around ten times more than electronic payments. So, in the near term, reducing costs is going to become a driver that accelerates payment automation adoption.

I think this driver will remain over the long term as well, and could very well change our payment behaviors forever. Short term imperatives will drive greater adoption, but as more organizations get a taste of automated payments, it will change the way they think about payments. They will realize there is a far better way to pay than writing checks, and I can’t see anyone who’s adopted payment automation going back to the old way.

Fintechs really are redefining business payments. Banks provide ways to move money from point A to point B. The business case for that is pretty simple—get the best deal on per transaction costs, but beware of the need to add headcount to use these products.

As awareness of these solutions grows, buyers should dig into the details and ask questions to really understand what they are getting and the differences between solution providers, and bank offerings. Some questions to ask are:

-How are payment issues handled and what are the SLAs (service level agreements) around payment support and resolution?

-What does the provider take responsibility for?

-How is data managed?

-How does the provider treat your suppliers, and what services do they offer them?

-How does the provider protect against fraud?

-How are they protected in the event of a disaster?

-How many payments are really sent electronically with their solution?

Some fintechs offer a surprisingly low number of electronic payments. Anything lower than 20 percent is not a payment solution; it’s a payment hobby, and buyers today can make the case for something a lot better. The best fintechs address the entire payment process with automation and services, which enables organizations to move 100 percent of payments electronically with a fraction of the effort previously required, and, by doing so, dramatically lower overall costs.

checks

This is How Rooted Checks are in our History

If your company makes payments, I’m willing to bet you’ve at least Googled cost-effective ways to simplify the process. Perhaps you’re an enterprise making hundreds of payments a day. Or maybe you’re a small- to mid-sized business looking to ease the manual burden on your small-but-plucky AP team.

One of the biggest arguments against checks is that they’re just plain old, invented to support even older banking processes. Of course, the term “old” is relative, so what does it mean when we’re talking about check history? You might be surprised.

Checks used to make a lot of sense

Checks developed alongside banks, with the concept for payment withdrawals based on recorded instruction appearing in history as early as 300 B.C. in India or Rome, depending on who you ask. Paper-based checks made their debut in the Netherlands in the 1500s, and took root in North America about a century before the Declaration of Independence was signed. The oldest surviving checkbook in the U.S. dates back to the late 1700s—and the register even has a notation for a check made out to Alexander Hamilton for legal services.

So, yes, checks are old.

What started as a safe and strategic way to transfer money—one that protected merchants’ safety and livelihoods—ingrained itself in business dealings for hundreds of years. It’s challenging to phase out something like that entirely, even if checks are difficult to adapt to today’s electronic processes.

Hanging onto the past

Each business that holds onto its check process has a reason. Perhaps their AP team’s veteran employees are more comfortable with the familiarity of checks. They may wish to preserve business relationships with suppliers that prefer checks. Some businesses are very likely interested in switching to electronic processes because check payments are expensive—but they hold back due to the perceived process upheaval.

These concerns aren’t unfounded. They’re built upon years—and generations—of business experience. So while plenty of news outlets claim that checks will phase out “soon,” we should more realistically expect that they’ll be incorporated into—not eradicated from—modern business practices. At least for now.

Time for a change

While banks have made efforts to simplify the payee’s ability to cash checks electronically, only a few have attempted to tackle the time-consuming issues that their customers face. They also lack ways to incorporate outdated check processes with the newer ACH and credit card processes their customers are also expected to support.

If checks are here to stay, do companies need to resign themselves to endless signature hunts, letter-stuffing parties, and post office visits? No. Checks have the spectacular ability to evolve as modern needs arise. After all, the first printed checks in the U.S. didn’t have the standardized MICR format that we use today.

Change happens slowly and in easily digestible segments. So although checks aren’t going away any time soon, they’re overdue for another evolution.

A middle ground exists, where business owners can upgrade their processes without causing major supplier or employee upset. Payment automation solutions have been growing in recognition for over a decade. The most successful providers have acknowledged the gray area with checks and incorporated them into their simplified electronic payment workflows. These alternatives reduce AP workloads without forcing suppliers to accept payment types that don’t work for them.

Checks have come a long way since their conceptual days, and their flexibility means we probably won’t see the last of them anytime soon. We are, however, in the midst of their shift into the electronic world, and AP teams are all the happier for it.

Are you interested in the history of wire payments? Check out this article.

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Alyssa Callahan is the Content Strategist at Nvoicepay, a FLEETCOR company. She has five years of experience in the B2B payment industry, specializing in cross-border B2B payment processes.

AI

8 Ways your AP Process Leaks Spend – and How AI can Prevent it

Today’s companies put huge efforts into negotiating the best terms with their suppliers. Procurement teams regularly spend weeks or months going back and forth on contract terms and volume discounts to get the most bang for their buck.

Too often, these savings aren’t realized. Suppliers may ignore the negotiated terms when invoicing, and AP teams, faced with a deluge of invoices and limited time to get payments out the door, only sample select transactions and only do basic 2 or 3 way matching of volume and price. This inevitably means costly invoice problems fall through the cracks — from mismatched invoice and contract terms, to unapplied discounts, to completely bogus charges, and more.

Optimizing your AP process may seem like a big undertaking, but it’s much easier than it might seem, and worth the effort. According to The International Association of Contracts and Commercial Management (IACCM), companies that work to improve controls over invoice payment will see a return of more than 4 percent of invoice value.

Even if you’re ready to improve your AP process, one pesky question remains: How do you actually do it? Once upon a time, it would have been necessary to hire more people to check every transaction. But today, technology can provide a crucial and cost-effective assist for overstretched AP teams.

Artificial intelligence (AI) is becoming more and more common in business contexts. Nearly 90 percent of companies planned to increase AI spend in 2019, according to a Deloitte survey. However, the idea of actually using AI may feel a little unrealistic for some. While more and more corporations are automating AP processes, 30 percent of businesses still rely on manual invoice processing, according to The Institute of Finance and Management.

If you’ve already implemented other technologies in your workflow, AI can fit in seamlessly. AI-powered spend automation software integrates with existing expense management, invoice automation, contract management, and ERP systems to augment rather than disrupt your status quo.

8 common (and costly) invoice problems

Here are just a few of the problems AI-powered solutions can help your team avoid during the spend audit process:

1. Fraudulent invoices: When it comes to invoice fraud, if you can dream it, chances are fraudsters have tried it: From inflated invoices, to completely made-up charges, to shell companies, to vendor impersonation, and more.

Too often, the calls are coming from inside the house. The Association of Certified Fraud Examiners (ACFE) found that occupational fraud (fraud committed by employees against employers) resulted in more than $7 billion in total losses in 2018. AI systems with a compliance component can spot risk factors commonly associated with fraud so your team has a chance to review these invoices manually before they’re paid out.

2. Duplicate invoices: Up to two percent of the average company’s invoices a duplicates, according to AuditNet. This may seem like a relatively small number, but for businesses doling out millions or billions on business activities, the figure is far from trivial.

Some vendors might double up charges on purpose, but often duplicate invoices are mistakes (after all, your vendors’ finance teams are overworked too). While some invoice automation systems try to catch these double charges, they usually only succeed if the invoices are labeled with the same number or have the exact same total — which isn’t always the case, particularly if there’s someone scheming behind the scenes.

3. Missing discounts: You fought hard for volume discounts, but how often are you checking invoices to make sure they’re applied? AI-based systems can often  compare contract and invoice terms automatically to make sure you’re not missing out on early payment, loyalty, or quantity discounts. You’ll be notified of any missing discounts so you can remedy the situation before you pay. In the case of early payment discounts, this software notifies you that the invoice should be prioritized to get payment out in ample time.

 4. Mismatched service levels: You signed up for the standard package, but you’re being charged for the premium offering. This type of mismatch is all too easy to overlook amid your monthly deluge of invoices.

The correct AI solution can compare agreed-upon service levels in your contract with every invoice you receive to make sure that this type of costly problem doesn’t fly under the radar. When it comes to physical items, it can ensure you receive all the items you’re being billed for before you pay, by double-checking shipping documents against inventory systems.

5. Double payments: Double payments can happen as a result of vendors submitting duplicate invoices, but the problem can also originate from your own team. Accounting systems hold up an invoice for all sorts of reasons, e.g., it requires further approval or it failed a match. In many cases, an employee might intervene to get the invoice paid manually (to meet a deadline or because they’re being pestered by a supplier or don’t want to damage a relationship). Meanwhile, the invoice is still in your system and when the hold is later cleared up, it’s processed and paid… again.

This is another one of those sources of spend leakage that most companies never become aware of. AI-powered systems constantly cross-check invoices and payments and flag any duplicate payments before you send them out, so the money never leaves the front door.

6. Exorbitant pricing: It can be difficult and time-consuming to keep track of the market rate for all the various services and products your business requires. AI can regularly compare your current costs to thousands of other sources to determine whether your invoices reflect the market rate for the goods or services provided. It can also flag individual invoices where your price exceeds the market rate.

Knowledge is power, and this information helps your business negotiate more effectively with existing suppliers or look to new ones if there’s an opportunity for cost savings without sacrificing quality.

7. Unsatisfactory work activity: When it comes to hiring contractors, there are situations when it’s particularly difficult to understand and assess whether they’re fulfilling their agreed-upon duties, like professional and IT services. AI-based tools can ingest nearly unlimited data to build a profile of what comprises satisfactory work activity — e.g., regular activity in Slack or over email — and highlight changes in the typical patterns. This helps you verify that you’re paying contractors fairly for the work product they’re providing.

8. Overpaying for software: Are you licensed for seven software seats, but only using three? It’s not uncommon for organizations to overpay for software licenses without ever realizing it. AI-based software keeps tabs on your organization’s software usage and compare it to the charges on your monthly invoices to help alert you to savings opportunities.

How AI can help

Implementing a best-in-class AI solution can support a consistent process and add an additional layer of scrutiny. These solutions make it possible to audit 100% of invoice spend prior to payment, automatically and near-instantaneously checking every invoice in your system for risk factors before they’re paid, and flagging the highest risk items for your team to review. This will help your team get ahead of problems and potential leakage, rather than try to recover it afterwards.

Below are the critical requirements for considering an AI solution for AP spend management:

1. Audit 100%, prepayment. Automatically audit 100% of invoices before reimbursement with AI.

2. Understand documents. Instantly scan every line of every invoice to understand charges and track the correct spend category.

3. Enrich with intelligence. Check online sources to identify better prices for similar goods and services.

4. Assess and refine risk. Flag suspicious addresses or billing changes to avoid fraud. Spot duplicate charges from other invoices, other invoice systems, or from expenses.

5. Streamline process. Integrate into your existing AP automation system to audit every invoice in real time to spot errors, waste, and fraud.

Conclusion

The best AI software can help your team regain control over your spend by checking every single transaction to identify high-risk invoices in your pipeline — saving time, streamlining processes, and ultimately reducing spend leakage.

If your AP team’s efforts to find problematic spend feels neverending, you’re not alone — but it doesn’t have to be that way. AI has changed the paradigm for modern finance teams, giving them greater visibility into their AP process and the time they need to address the highest risk issues. Not only can AI transform the way finance teams operate, it also saves them business money by spotting problems consistently and before invoices are paid. By implementing a leading AI solution, your team can audit 100% of spend, make sure that every invoice complies with its contract terms, and ensure you’re receiving every savings opportunity you’re entitled to — all while paying your bills on time.

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Anant Kale founded AppZen in 2012 to bring AI into back offices around the world. As CEO he is responsible for the product vision and execution of the company’s broad mission. Previously he was the VP of Applications at Fujitsu America from 2009-2012, responsible for product management, and delivery of Fujitsu’s applications and infrastructure for enterprise. He has 15+ years of experience in software development. He has an MBA and a BS in Finance and Engineering from Mumbai University.

How Small Business Should Think About Financing

It’s no secret that over half of small businesses close their doors within the first five years. One of the critical problems that often occur has little to do with the innovation, ingenuity, or work ethic of the small business owners themselves, but rather the lack of access to sufficient capital to cover the ebbs and flows of their operation and its associated costs. 

Scaling any idea or enterprise, to me, is less often about “entrepreneurship” —and other catchy terms we can print on a business card— and more about meeting the demands of others, like payroll and customer expectations. Simply put: small business owners need capital resources— they need cash. 

Historically, small businesses have had limited options to access capital: savings, friends and family, credit cards, traditional bank loans, or the occasional SBA loan. Enter the financial crisis of 2008-2009, which ushered in a new regulatory environment that contracted these historic capital resources, thereby creating the market-driven need and demand for non-traditional banking options.

Consequently, we find ourselves operating in a new era, one in which enterprising nonbank funders have brought novel and different capital products to the small business market. This has been largely accomplished through an ambitious mix of fintech and financial innovation. These previously unavailable financing options give small businesses more resources to consider than ever before. Now their next step is to explore them and consider how their small business might decide on the best option for their specific needs. 

As we contemplate these innovations, here’s a quick list of some of the best financing options available to small businesses:

Business Term Loans: Best for businesses looking for working capital, equipment purchases, or to purchase inventory or other fixed assets. For short-term loans, it can often be matched to a specific project and repaid to coincide with the completion of that project in 6 to 12 months. For longer-term loans, the repayment can be stretched out to 3 to 10 years, but these often require higher levels of collateral coverage or a personal guaranty by the business owner. 

Pros: Great product for larger one-time investments with targeted cash loans flow that payments can be matched. 

Cons: Larger dollar amounts and a longer payback term will require increased time, energy (think: bank meetings and interviews), and documentation. 

Equipment Financing: Best for one-off purchases like restaurant equipment and machinery. 

Pros: no upfront spend; if the business owner has impaired credit the fact an asset is involved as collateral can make it easier vs. purchasing the equipment; and tax-deductible.

Cons: Overall cost is usually more expensive in the long-run; cost inclusive of fees if the lease is terminated early can be substantial; and must take into account all terms and conditions that can be complicated (who handles and addresses a break-down in the equipment? etc).

Small Business Administration (SBA) Loan: Best for business owners who need capital for a variety of longer-term business expenses. It is government guaranteed so the process can be daunting and is processed through a bank that has an SBA loan program. 

Pros: Cost and longer-term repayment; great product for owner-occupied real estate.  

Cons: Requirements are strict; process is time-consuming (60 to 180 days); high upfront fees; and requires strong personal credit scores.


Business Line of Credit (“LoC”): Best for businesses with more volatile sales and cash flow. Flexibility to drawdown and repay based on the needs of your business.  Often secured by accounts receivable and inventory. Some LoC’s offered by FinTech operators do not require business collateral but do require a personal guaranty.  

Pros: Can access quickly (assuming facility is in place) to solve urgent issues or expenses; and great for managing working capital needs and the business’ short-term cash flow needs.  

Cons: Reporting can be much more intensive vs. other products available; upfront and ongoing fees can be expensive, especially if the LOC is rarely drawn down.


Revenue-Based Financing: This is a financing option where the repayment schedule is tied to the future revenue of the business. The genesis of the product is that the funder operates as more of a partner and is taking some level of “equity-risk”. If the revenue decreases or the business fails, the repayment is either stretched out or in the case the business fails the funder has no recourse. Small businesses can utilize this product for project financing, working capital, growth investments, or short-term needs. 

Pros: Quick access; repayment risk mirrors the revenue; no business or personal recourse except in the case of fraud.  

Cons: Products are generally 12 months or less; more expensive given level of risk with limited recourse; reporting can be intensive as changes to payment schedules requires bank and financial verification.

Invoice Factoring: The business can turn its unpaid invoices into immediate cash. The invoice factoring company collects directly from the customers and distributes capital to the business, net of its fee. 

Pros: good for managing cash flow; typically a short-term financing product (30 to 90 days).  

Cons: cost can be expensive, especially if repaid much quicker than anticipated; can be disruptive notifying customers to change their payment instructions to the factoring company; requires technology integration or higher level of reporting and the business’ customers will be dealing directly with your funder if they delay payment – not you as the business owner.  

Angel Investors/ Venture Capital: Best for small businesses who want to scale quickly. 

Pros: entrepreneurial background provides increased insights and foresight vs. dealing with alternative finance providers, banks, or the government; larger investor network to leverage for additional funds or additional business; and capital remains in the business (vs. interest costs). 

Cons: Higher rates of returns expected (typically at least 5x their investment); requires giving up equity in the business; process will be intensive; typically reserved for high visibility, disruptive companies pursuing large addressable markets on a national or global scale; and will require operating agreement additions to governance to protect their investment in the case of underperformance.

Bootstrapping: Best for businesses with principals that have savings or expendable income who want to preserve equity ownership and cash in the business. 

Pros: maintain ownership position and keeps all cash generated either in the business or available for dividends. 

Cons: Growth limited to the owner’s cash position; risk missing market opportunity because thinly capitalized; challenging if a short-term need requires more cash than available.

While the pros and cons of this list provide a guide to financing in 2019, any financing decision should ultimately come down to your assessment of the cash flows of the business (today and in the near term), demonstrated capacity to handle credit, costs versus profit opportunity (positive ROI), and repayment thresholds. 

The good news is, enabling technology allows small business owners to access various forms of capital quickly and efficiently. There is no day like today to explore options to fund entrepreneurial dreams. 

_______________________________________________________________

Vincent Ney is a founder and CEO of Expansion Capital Group, a business dedicated to serving American small businesses by providing access to capital and other resources so they can grow and achieve their definition of success. Since inception, ECG has connected over 12,000 small businesses nationwide to approximately $350 million in capital 

Accounts

How to Overcome the Struggle of Multiple Account Reconciliations

How does a company end up with dozens, or even hundreds of
bank accounts? It’s not an uncommon situation for a large
enterprise, especially in industries such as hospitality, construction, or healthcare, where there are multiple locations and business entities under one umbrella. Or, maybe the company has grown by acquiring other companies, as is common in high tech, and they centralize accounts payable but retain the separate bank accounts. According to the 2019 AFP Payments Fraud and Control Survey, 83% of companies with over a billion dollars in revenue have more than five payment accounts, and 46% have more than
25 accounts.

No matter what the reason, making payments from multiple bank
accounts creates a lot of complexity in AP. It makes cash management difficult, increases the risk of errors and fraud, and
creates an ongoing nightmare when it comes to reconciliation.
Fortunately, new payments automation technology can help
address the challenges of making payments from multiple
accounts.

Multiplying by Four

Most companies are contending with four different payment
workflows—check, card, ACH and wire, or five if you’re doing
international payments. Basically, you can multiply the number of bank accounts by four or five, and that’s how many processes you
have to manage.

But at least those processes are pretty standard. A check is a
check; a card is a card; NACHA sets the standard for an ACH file;
and a wire is a form fill on a bank portal. With payments
automation technology, you can wrap all of those workflows
together in a single dashboard. Payment is intelligently routed
from each account by the most advantageous means—you no
longer have to care what type of payment the vendor accepts. It’s
all taken care of for you.

Exponentially More Convoluted

The big win though, is on the back end, when it comes time to true
up the payments leaving each account with the general ledger. The
dirty little secret, known only to accounts payable professionals, is
that there is no standard for a reconciliation file—or even a
requirement to send one.

Each bank and card provider can send it in a different format, with
different information, or not at all. That makes reconciling
payments data with the accounting or ERP system—or multiple
accounting or ERP systems—exponentially more convoluted. It’s no longer X number of payment types times Y number of bank
accounts. It’s a different procedure for almost every type of
payment and/or bank or payment provider.

That amount of complexity and manual work inevitably leads to a
higher error rate. And, it opens you up to more instances of fraud.
According to the AFP survey, 72% of organizations with $1 billion or more in revenues and more than 100 payment accounts
experienced attempted or actual payment fraud.

Since daily reconciliation is cited the top defense against fraud at
companies of all sizes, consistently receiving standardized, easy-to-
digest reconciliation reports would help mitigate the fraud risk
associated with multiple payment accounts.

Filling the Data Gaps

Now there’s an opportunity to partner with Fintech companies in
order to help with that transfer of data. Up until recently, the only
way to reconcile multiple accounts was by throwing a lot of people
at the problem, or by bringing in a shared services provider.
Fintech business payments providers are leveraging the cloud,
APIs and online supplier networks to fill the gaps in workflow
automation and data transfer that have been left by banks and
traditional financial services firms.

You can easily make payments—including international
payments—from multiple bank accounts, and push a standardized
reconciliation report back to each, all in one easy process. Some
payment platforms can even push card rebates back into the right
accounts.

This is all possible when your payment provider stores payment,
bank, and vendor data in one cloud platform, and can use
technology to automatically match all the data up, pour it into a
uniform report, and push it back out to the payee. That’s
impossible when you’re working directly with lots of different
banks and payment providers, because no one entity has visibility
into all of the data.

There are a lot of reasons why it makes sense for a company to
have multiple payment accounts, but nobody thinks much about
the pain it’s going to cause in accounts payable. It’s one of those
hidden back office problems banks and traditional financial service
providers have never been able to solve, so accounts payable
professionals have found a way to live with it. Nowadays though,
there are ways to live without it.

_______________________________________________

Mike Fortmann is the Vice President of Sales, Southwest Region at
Nvoicepay. He is an accomplished payment industry expert with more than five years experience in delivering scalable payment solutions.