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How Streamlining Payments Helps Build Vendor Relationships

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Archives, Banking, Global Trade Daily

How Streamlining Payments Helps Build Vendor Relationships

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I’d like to dispel some common misconceptions about B2B payments. First, the misconception that vendors don’t want to be paid by check. Next, let’s dispel the notion that vendors won’t take card payments.

I’ve worked in payments for a couple of decades now. I’ve managed cash handling, check processing, and lockbox operations. I’ve spent the last 10 years or so in the Mastercard B2B space. Based on my experience, I can tell you what vendors really want: convenience and choice.

Doesn’t everyone?

New choices

It used to be that the customer could dictate a payment method and vendors had no choice but to accept. That has been slowly changing. We saw a lot more vendors raising their hands to ask for electronic payments during the COVID-19 Pandemic, but this shift began even before that. Fintech companies have introduced a lot of new payment options, and vendors are more aware that they have choices.

It now falls to buyers to give vendors the convenience and choice they want, without overburdening their accounts payable departments. That means using automation to streamline payment and vendor enablement workflows. AP can then easily accommodate all payment types and let vendors choose what’s most convenient for them.

Different definitions of convenience

When vendors want to be paid by check, it’s often because they have some sort of mechanism that makes it easy to process them. In larger companies for example, that often means using their treasury bank to do lockbox processing for them. Banks will often provide this service for free to win other, more profitable business.

The bank collects all the checks from the lockbox, keys in the data and deposits them. All accounts receivable has to do is absorb a file that has all of the check data. That is a pretty clean process, and a compelling reason to be paid by check.

What about ACH? There’s no paper to handle, and the vendor gets the money faster. Why wouldn’t they want ACH payments? Well, ACH fraud is on the rise, and not all vendors want to risk exposing their banking data to their buyers.

Vendors might actually prefer a single use credit card. The common wisdom against that thought is that vendors won’t want to pay credit card fees. The reality is that virtual cards are gaining in popularity because you get paid fast and fraud risk is low. You don’t have to expose your banking data, and the card number becomes unusable once it’s been processed. For some vendors, that’s worth the fee.

No limits

The point is there’s a market for all payment types. For a buyer to limit themselves to just one or two payment options is to potentially limit whom they can do business with. With all the supply chain problems we’ve been experiencing it’s incredibly important to keep your vendors happy. The best way to do that is to make sure they get paid on time, in the manner of their choosing.

The problem, as many AP teams learned during the pandemic, is that doing electronic payments at scale is a lot harder than it seems at first glance.

You need to have the resources to enable vendors for electronic payments, on an ongoing basis. That means continual outreach to find out which vendors will accept a card or an ACH. It means collecting and verifying their banking data when you onboard them, and having processes in place to verify any requests to change bank account information. It means having a way to know if a virtual card payment hasn’t been processed, and a way of dealing with a card that is still open.

You also need very strong systems and processes in place to protect your organization against ACH fraud. If you’re not up to speed on using technology to validate and secure vendor information, and fend off fraud attacks, you’re putting your organization at risk.

AP teams already tend to be short-staffed. Turnover is high, and the amount of process documentation they have is low. They don’t have the capacity to take on this extra work.

Here’s where it gets good: AP teams shouldn’t have to take on extra work to make electronic payments work. The whole process can be streamlined by working with a payment automation provider. Automation providers typically provide a single workflow for all types of payments. All the person in AP has to do is select who to pay, and the provider will pay each vendor by their preferred method.

More importantly, automation providers take on all the work of enablement, including outreach and safeguarding vendor data. They also indemnify their customers against fraud. It couldn’t be more streamlined–all AP really has to do is click pay.

Convenience and choice for all

Checks have been the prevalent B2B payment method for a very long time, and for some very good reasons. The COVID-19 Pandemic, and our current supply chain woes, have made many organizations reconsider check use.

Vendors are increasingly aware that they do not have to let the buyer dictate how they get paid. Vendors now know that they are able to come to buyers and say, “We’ve got three payment options for you to choose from,”.

Fintech companies are providing new choices for buyers, too. Payment automation lets them offer vendors convenience and choice, without inconveniencing themselves. It’s a win-win, and that is the best possible way to build a relationship.

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Kim Lockett is Vice President of Customer Success and Services for Nvoicepay, a FLEETCOR company. She has more than 30 years of experience in payments, with a heavy focus on back-office operations and customer engagement. Prior to Nvoicepay, Kim held operations management and leadership positions with Comdata, Crestmark Bank, and Regions Bank.

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How to Calculate the Real Benefits of ROI

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There’s a healthy number of ROI opportunities within the payment automation sphere, and it’s relatively easy to estimate for any given organization by doing a payment analysis. Unfortunately, many professionals don’t take advantage of the available opportunities—or otherwise can’t recognize them due to the constantly shifting payment landscape. Payment automation companies make it their business to identify the options for each firm based on their unique needs and criteria.

For example, Nvoicepay scans for ROI possibilities by looking through vendor and payment data from the previous year. We focus on areas that will produce the most positive impact: transactional cost reduction and increased rebates, for example. Altogether, there are several areas where organizations see positive ROI from payment automation. Below are seven ways in which payment automation supports time and money savings, and how payment automation companies can lend a hand in achieving these goals. The examples given are based on our internal data.

1. Reduced check payments.

Checks are the most expensive and time-consuming way to pay vendors. While switching vendors to electronic payment can be a time-consuming project, keeping to the status quo becomes even more costly in time and dollars in the long run.

While check costs vary by company, the general cost to print and mail checks is between $3 and $8 per check. This includes purchasing check stock, envelopes, postage, and staff time. We find that most organizations can reduce the number of checks they’re writing by about 70 percent.

For example, if you’re writing a thousand checks per month at $3,000, switching 70 percent of your vendors to electronic payment options will reduce the number of checks to roughly 300, costing $900. In this scenario, you’d save $2,100 monthly and $25,200 annually.

2. Increased rebates.

Find chances to earn rebates, whether that’s making payments to vendors within a certain time limit, or meeting other requirements that ease up on the receivables workload. For companies that maintain a large vendor base, it can be tricky to scope out advantageous prospects.

We have found that roughly 15-20 percent of vendors accept credit card, which is an excellent place to start looking for rebate potential. It’s startlingly effective to ask vendors if they’re able to accept card. If even 150 vendors out of every 1000 switch to virtual cards, especially if they’re highest-paid vendors, you have the chance to generate rebates on hundreds of thousands of dollars each month.

3. Enabling vendors for electronic payments.

Setting vendors up for electronic payment requires several steps, including reaching out to each vendor to ask which forms of payment they’ll accept, and collecting and verifying the provided information. Based on our experience enabling nearly a million vendors in our network, we estimate that this process takes roughly 30 minutes per vendor. To switch 350 vendors to electronic payments would take about 700 hours of enablement work. If you pay your accounts payable team $25 an hour (a conservative estimate) the time spent on enrolling the 350 vendors would cost your company $17,500. Taking advantage of payment automation’s enablement programs often significantly reduces this cost, as well as the time spent on the process.

4. Prevented or resolved ACH errors.

ACH files are very rigid and difficult to work with. Making one mistake can run the risk of the entire payment file being rejected. On a more granular level, misapplied ACH payments are very time-consuming to retrieve. We estimate that glitches affect one percent of ACH payments, with an average resolution time of 45 minutes per payment.

5. Stopped payments, refunds, and reissues.

Retrieving payments can cost more than simply the bank’s stop payment fee. Also included is the time it takes to communicate the error with the payee, figuring out the right amount, and re-issuing the payment. Or perhaps also asking for a refund in the event the initial payment went through before it could be stopped. We have found that roughly .05 percent of payments require this type of intervention, and each occurrence can take about 45 minutes to resolve.

6. Supplier follow-up and outreach.

Every year, about 25 percent of vendors will have some kind of change that requires an update to AP records. This can include an address, company name or bank account change, or even contact changes for new employees.

The average time to work through those changes is about 15 minutes each. If you have 2,000 vendors, about 500 of them will require some updating each year. This costs about 125 hours annually or $3,105 at $25 an hour.

7. Prevented or resolved erroneous payments.

Payment errors happen—it’s an unavoidable—and familiar—aspect of any payment process. But automation can help to prevent a majority of the errors that are caused by accidents.

Based on our internal metrics, we estimate that the average AP person spends 45 minutes per error. We’re calculating based on an error rate of about 1 percent, which is our organization’s average—this number may be a conservative estimate for some businesses. Using this number, if a company makes 1000 payments a month, ten will require error resolution. That equates to about seven and a half hours per month, or 90 hours annually, at a total cost of $2,250.

On the opposite end of the spectrum, fraud also poses a threat. It’s a bit harder to estimate the ROI on fraud prevention because losses vary depending on the level of a breach. That said, it’s not outside the realm of possibility to expect fraud to measure anywhere from hundreds to millions of dollars.

Yes, And…

The seven items in the list are some of the most common, calculable issues that Nvoicepay sees in our incoming customers. That said, there are other issues that are more difficult to calculate, which is why they didn’t make our list. These include issues like late payment fees and lost discounts due to slow payment turn-around times.

That’s not to say those issues, or others, aren’t important. But the time and money costs—as well as the value in fixing those issues—are simply more subjective.

Most organizations are aware that checks are expensive, but they may not take the time to analyze how much their older processes are costing them. This is probably the biggest obstacle to automating payments—the “if it ain’t broke, don’t fix it” notion. When you never add it all up, then you don’t see how broke it actually is.

By taking a simple, conservative, holistic view of the hard cost savings and operational efficiencies you can achieve, it becomes much clearer what the ROI is, and more importantly, all the areas in which your organization can move forward by automating.

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Mark Penserini is VP of Partner Management at Nvoicepay and has over 25 years of operational and technical experience specializing in project management across Healthcare, Finance, and IT operations.

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How Payment Automation Can Positively Transform Your Logistics Company

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Cutting down on your business’ costly, high-effort administrative tasks is always a great idea. Especially when doing so also increases accuracy and limits human errors.

One of the many operational areas where automation can play a positive role in your company is in its accounts payable (AP) departments. 

Despite how incredibly admin-heavy payment processes typically are, AP departments still seem stuck in an outdated paradigm. We get it, though. It feels risky to digitize long-established manual processes. It rocks a boat that feels stable, albeit moving really slowly. But digitization and automation, as scary as it sounds, is an absolute necessity if you want to survive in the world of logistics. 

As we referenced in a previous article on this topic, the AFP reported that 42% of all payments that businesses make still happen by printed checks. This represents a shocking amount of wasted effort. Especially if you consider the many alternatives available to AP departments nowadays.

At the same time, the payment automation industry has matured significantly. As a result, the available solutions in this space have grown in number, capabilities, and reputation. The genuinely exceptional products in this niche are enabled by innovative technology and supported by intuitive workflows. They utilize reliable, secure financial processes. 

Here are some tangible rewards your logistics company will enjoy once you’ve modernized it with one of these automation solutions.

It Speeds up Invoice Approval

According to Stampli, 57% of companies who switched to AP automation did so because it reduces invoice approval time.

In the logistics industry, where businesses rely on the services of many external service providers, unpaid invoices can quickly start piling up. This can cause an admin backlog that’s not only an operational headache to fix but can also have more serious consequences. In extreme cases, unpaid invoices can disrupt supply chains and damage the reputations of both logistics companies and their customers.

Automatic payment solutions typically enable effective workflows that simplify approvals and lower the risk of unpaid invoices falling through the cracks. 

These tools act as a dedicated, real-time communication channel between AP staff and other resources within the company. They also offer digital approval mechanisms that almost entirely remove the need for physical interaction and document handovers.

It Improves Morale and Accuracy

Data entry and invoice management both feature very prominently in Business Insider’s list of organizational morale-killers. 

Unfortunately, the nature of an AP department’s work dictates that these two tasks take up quite a bit of the average clerk’s time. Repetition leads to boredom, and boredom can lead to a lack of focus and mistakes.

This is human nature. Management or incentivization are not sustainable solutions to this inescapable reality of the manual workplace. 

What’s the answer, then? (No prizes for guessing.)

Tools that enable payment automation often include features like automatic data extraction, AI-powered data matching, and character recognition, and automated ledger capturing. 

All of these are excellent alternatives to an analog approach that’s compromised by tedium and an inevitable lack of focus.

It Prevents Payments Being Overlooked

People make mistakes. They forget to do stuff, even things that are a core function of their job. No one is infallible. 

Even when all the necessary details are taken care of, the human being responsible for clicking on the “pay” button or for taking a check to the bank can still simply forget to do so.

The fallout from this little oversight can be significant. Late payments hurt reputations. They can severely disrupt supply chains. And missing out on early-payment discounts can damage cash flows, especially when dealing with large invoice amounts as logistics companies often do.

By design, automated payment systems avoid this scenario entirely. Each tool offers a slew of features that help AP teams make sure payments are made on time. 

It Creates an Additional Source of Usable Data

One of the biggest rewards of being a data-driven company is that strategic decisions can be based on cold, hard facts rather than hunches. 

In a professional environment that’s as cutthroat as logistics, we cannot afford to rely on hunches. No matter how much instinct or insight a manager may have, nothing is going to beat meaningful data when it comes to supporting important decisions.

In all likelihood, your logistics company is already using an operations tool like CarLo, Descartes, and SBT to create meaningful information. You may even be using your CRM, accounting, or HR tools to contribute to the data pool that drives strategy.

This is a great position to be in. The usefulness of data improves dramatically as one combines information from various sources within the organization.

If your AP department is still running on pens, ink, and visits to a bank, it’s creating no digital data. And there’s no way for it to contribute to the data stacks that inform important decisions within the company.

A solid payment automation tool will solve this problem, creating cloud-hosted data that your business intelligence software will easily be able to reference.

In Closing: the Importance of Finding the Right Fit

Not all payment automation solutions are created equal. They differ in terms of price, workflow enablement, technical features, and sensitivity to industry regulations.

That’s why it’s vital for you to do a thorough investigation into the products in this space and choose one that best suits your logistics company. 

Take your time and think through what sets one solution apart from another. Be sure to invest in one that’s not only ideal for the nuances of your industry but also your company’s established workflows and culture.

This is a big decision. The stakes are high. Don’t hesitate to involve your entire AP team to get their input. Each of them will be able to provide unique insights into their daily tasks and advise on how a particular product could help them or hinder them.

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Why Credit Cards Could Be the Next Big Opportunity in B2B Payments

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With the advent of widespread remote work, businesses have made impressive leaps in eliminating checks and adopting electronic supplier payments. These changes primarily translated to increasing the number of ACH or Direct Deposit payments made. According to Nacha—the governing body for the ACH network—business-to-business payments for supply chains, supplier payments, bills, and other transfers increased by almost 11% in 2020. But as organizations adopt electronic payment processes, there’s another strategic opportunity for AP to consider: electronic credit card.

Most companies’ payments flow through AP, yet few AP departments today are making significant use of credit cards to their fullest potential. Historically, companies use credit cards as a decentralized way to manage expenses. In order to do their jobs, employees need to spend efficiently, without going through a bureaucratic process. Traditional commercial programs have been focused on companies giving their employees purchasing cards (p-cards) or travel and entertainment cards (T&E cards) which they could use for supplies, meals, or departmental expenses such as software subscriptions, and marketing expenses—items that would be classified as indirect spending. However, while the benefits of these programs are clear, even in a depressed travel environment, it falls short of the full potential of complete credit card utilization.

Old vs. New

Companies can establish guardrails for spending on these cards. They can add controls to limit employee spending or only allow them to spend in certain places. There are also mechanisms in place to do post-transaction reviews and allow for remediation for inappropriate spending. Due to the combination of convenience and control, finance departments often think about cards as tools for employee productivity, with customizable spending controls.

This only touches on one aspect of company spending, however. Companies spend far more of their budget through traditional purchase orders and invoices for direct expenses like materials, components, freight, and labor. The idea that AP could utilize a card for direct expenses has still not been widely accepted.

Cards provide easy access to working capital and offer rewards like cash back or points. Many companies appreciate that cards are a better electronic payment option due to these benefits. The question then becomes: how do you build a successful card program in accounts payable? Generally, businesses have to make card processes work within their pre-existing AP infrastructure, which usually includes a supplier interaction component and a technical component that traditional players (banking institutions) in this space are not fully equipped to handle.

For example, banks primarily look at credit cards as another form of lending. They offer credit lines, which their customers spend against and pay back. Paying supplier by card usually enables businesses to reach their top 10 or 20 suppliers. That’s usually considered a successful lending program, but to interact with more suppliers, integrate with an ERP, or offer enhanced reconciliation data, banks don’t usually have the technical resources, because it’s beyond their traditional lending model.

Incorporating the New

Bank business models usually focus on building and maintaining a vast merchant acceptance network. You can walk into tens of millions of locations worldwide and if they have the Mastercard or Visa logo, you can use your credit card there, no questions asked. But when it comes to payments for suppliers, the acceptance network is inconsistent. Some suppliers don’t accept payment by card, or only accept them from certain customers depending on speed of payment, the margins, and the type of product that they’re selling. Due to these factors, paying by bank-issued card requires the vendor engagement process to include finding suppliers that already accept specific card types, ensure they accept that payment type from other customers, and locate new card-accepting suppliers.

That’s where fintechs really shine, because their business models are built to incorporate a supplier engagement process aimed at getting more spend on cards. Where banks generally looking for the top 10 to 20 suppliers, which might account for 70 percent of your total spend, fintechs go after the tail—that 30 percent of spend that probably accounts for more than 60 percent of your suppliers and takes more work to get on board. Essentially, they build out a B2B acceptance network inside the credit card acceptance network.

Scaling the Mountain Towards Change

Operationalized re-engagement models are a particularly important component of this business model because most companies churn 10 to 20 percent of their suppliers each year. Within two years, business’ supplier pools are different by 20 percent from when they began, so they must reach out constantly to maintain certain payment acceptances. While banks don’t always have the capacity to offer supplier acceptance maintenance, fintechs thrive when they include those services in their business model.

There are multiple benefits of capturing tail spend on cards. For example, doing so opens the door to paying more suppliers electronically, earning businesses more working capital and a higher potential for rebates. Virtual cards come with security and controls that plastic cards do not usually possess, including single-use numbers that are tied to unique suppliers and payment amounts. Tag on reconciliation data options, and the system becomes something that benefits accounts receivable as much as accounts payable. This opens more suppliers up to the idea of accepting electronic forms of payment.

Fintechs—technology-focused by nature—build their systems with a holistic viewpoint in mind, preferring to create software that doesn’t sacrifice one business’ operations for another’s. By enhancing the system end-to-end, previously reluctant accounts receivable teams, who felt strong-armed into giving up outdated payment processes, often become more willing and interested to learn about electronic alternatives.

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Rick Fletcher is the Comdata President of Corporate Payments, where he specializes in sales, marketing and product strategy, operations, and customer service.

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How Remote Work Lends Itself to Reshaping the Back Office

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The pandemic has been hard on everyone in different ways, and though the end is in sight, we’re not there yet. But, as we close in on a year and a half of working from home, we can look back with some perspective and perhaps a little pride at how we’ve adapted and changed. During this time, many people and organizations have discovered that they’re much more nimble, creative and resilient than they previously imagined.

I can see that in the accounts payable organizations with whom I have worked. The dual challenges of figuring out how to get payments out the door in a different way and learning to work remotely have been daunting, but people have figured out ways to get the job done.

Perhaps more than any other function, AP used to be a strictly in-the-office job, mainly because of all the paper processes they had in place. Invoices come in the mail. They have to be opened and keyed into accounting systems. Some companies have machines and OCRs (Optical Character Recognition) to help with this process, but many still follow manual processes. Checks must be printed, stuffed into envelopes, and run through a postage meter before they’re mailed. Security and controls are often paper-based, too—safes are kept for blank check stock and sensitive information.

It seems incredible to think that a year and a half ago, that was business as usual for the vast majority of organizations, and not many had plans to change. But change they have.

A New Way of Thinking

Nobody had a plan for sustained remote work. They may have had a short-term disaster recovery plan—for one or two people to work offsite or cover for the absence of a key employee. But nobody had a plan for the entire AP team to be out of the office indefinitely.

The initial struggle was to be able to continue processing payments on time. People brought their laptops home, but not their whole setup. They kept sending skeleton crews to the office to handle the paper processes. The thought was that we’d have to stick it out for a short period. We all know how that turned out.

Around the latter part of April 2020, we started to see people planning for the longer term. Companies set people up with home offices and all the security and connectivity they needed. They had to figure out new ways to communicate and collaborate. They had to figure out how to be productive at home, in many cases while juggling childcare and homeschooling.

At the same time, they started switching vendors to ACH payments in earnest. According to recent data from Nacha, the National Automated Clearinghouse, B2B ACH payments to vendors jumped a whopping 11 percent in 2020. They had to figure out new processes and new ways to keep information secure. Both of those are heavy lifts, which is a big part of the reason paper has persisted for so long.

It has been challenging to say the least, but I think that AP teams should be proud of how they’ve adapted.

Where to go from Here

Probably not back to the office—at least not five days a week. According to a recent report by Upwork, roughly one in four Americans will be working remotely in 2021. By 2025, 36.2 million Americans are expected to be working remotely, an 87% increase from pre-pandemic levels. A survey by the Pew Research Center found that given the option, more than half of employees say they want to keep working from home even after the pandemic abates.

Employers are becoming comfortable with the idea and are even finding some advantages, including access to a much larger talent pool and the ability to offer flexible work hours as a benefit. That could help AP to address the long-standing talent shortage.

The more significant opportunity, though, is to continue to think differently. I would be surprised if very many AP departments decide to return to the paper processes of old. The biggest reason people stuck with those for so long was that they were “working.” It’s hard to say that now. It’s also hard to say that accounts payable work can only be done in the office because we’ve been doing it outside the office for a year. The considerable delay in payment processing that some people expected never materialized. AP had to find a better way, and they did.

Moving Forward

They shouldn’t stop there. AP organizations should seize the moment to bring in technology partners to automate the entire payment workflow, address the growing fraud and security risks associated with ACH payments, and ensure the resiliency of payment workflows in a remote work world. They should be looking to automate invoice ingestion and processing and integrate into other transactional systems, eliminating manual work once and for all.

Nobody likes being forced to change, and that’s been perhaps one of the most difficult aspects of the experience we’ve all been living through for the past year. Now that AP teams have proven they have the resiliency and the ability to handle all the change that was thrust upon them, they should seize the opportunity to become drivers of change and key players in leading their organizations into the future.

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Kim Lockett is Vice President of Customer Success and Services for Nvoicepay, a FLEETCOR company. She has more than 30 years of experience in payments, with a heavy focus on back-office operations and customer engagement. Prior to Nvoicepay, Kim held operations management and leadership positions with Comdata, Crestmark Bank, and Regions Bank.

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What is Happening in the B2B Payment World in 2021?

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2020 was such an unexpected year. Even if you saw the pandemic coming, I doubt anyone would have guessed in March that we’d still be talking about it in 2021. Or grasped how much it would change pretty much everything. With that mindset, it almost seems ironic to make predictions. Still, some clear trends in B2B payments have emerged from the year’s events and are likely to unfold in the next twelve months. These are some of the trends that I see taking the driver’s seat in payment automation this year:

Checks Payments are Losing their Luster

The payment automation business case has largely focused on cost savings and AP efficiency. COVID-19 and remote work bolstered that business case—for safety purposes, many companies still hesitate to send employees to the office to cut checks. But what we’re hearing even more is that their suppliers don’t want to receive checks, and they’re asking buyers to start making payments by ACH. With suppliers adopting digital payments at a more significant rate, it feels like we’ve reached the tipping point where checks are becoming obsolete on a broader scale.

ACH Pain Hits Home

As organizations pay more suppliers by ACH credit, they realize the true cost of ACH payments and the risks around them. At $.25-.50 per transaction, ACH looks cheap, but when you consider the time, expense, and liability of supplier enablement, the real cost ends somewhere between $1.40 and $3.79—similar to what it costs to process a check. And that doesn’t include the cost of fraud prevention. ACH payment fraud is on the rise—particularly Vendor Email Compromise (VEC) schemes, where scammers pose as vendors and convince AP teams to send ACHs to fraudulent bank accounts.

Most enterprises have mature controls around check processes, and banks offer controls via Positive Pay and Positive Payee. However, those controls don’t always exist for ACH, and banks often struggle to offer fraud protection for this payment type simply because check fraud was the main focus for so long. But now ACH fraud is rising, and the risk is greater than with checks because the ACH payment process is worlds faster. It’s almost impossible to recover stolen funds if you don’t recognize the problem before the funds reach the bad actors. All these challenges are likely to push more organizations toward outsourcing their payment process to alleviate their overworked teams.

Digital Transformation Ripple Effects

We’re likely to see businesses sorting through some ripple effects in 2021. Organizations had to move forward urgently, and there wasn’t time to plan for some of the changes that would normally take time to implement.

There may also be impacts on external stakeholders. I think we’ll see similar ripple effects from rapid, tactical digitization across departments and industries. That will lead to a second, more strategic wave of transformation and automation with solution providers addressing emerging needs.

Electronic Data Speeds AR Processes

One of the hidden reasons checks held onto their popularity for so long is that they’re easy for AR to reconcile. The funds and data appear simultaneously, with the remittance data right on the check stub. From there, AR knows exactly how to apply the funds against their invoices. If they have a lockbox service with their bank, they don’t even have to key in the check details.

Until recently, that simplicity didn’t translate to ACH payments. AP staff would see ACH deposits in their account, but they wouldn’t necessarily be told how to apply them, because the data didn’t travel with the payment. NACHA (National Automated Clearing House Association) and the RTP (Real-Time Payments) network have improved ACH remittance data transfer. Although the number of fields and characters are limited, it’s a big step in the right direction.

Digitization Unlocks Supply Chain Financing

When it comes to supply chain financing, the U.S. is behind the times when compared to Europe, which has had electronic invoicing in place for a while. There’s a massive opportunity in the U.S. to create more fluidity and working capital for suppliers and buyers alike by using data to accomplish a faster and more dynamic kind of underwriting.

Smarter systems with access to the whole data stream—from PO issuing to payment transacting—can support pre-approved discount and financing options. This wasn’t possible in a paper-based environment, but we’ll see more of these offerings as businesses digitize their data.

A Transactional Social Network for Business

It’s becoming old-fashioned to think of buyers and suppliers—and AP and AR—as separate and independent organizations. Every AP team has a corresponding AR team. All companies are both buyers and suppliers. By looking at all connections between them, you start to see the huge social network of finance professionals behind the constant exchange of funds, POs, invoices, contracts, and other documents. However, for all the highly sensitive data, businesses are not equipped to handle these as securely as they should.

Some financial companies are using the B2B social networking concept to build proto versions of a “Facebook for Business” into their product. Still, we have yet to see any with broader functionality or mass adoption.

Whether a collection of technology firms share their vast network, or a single company creates and markets the right solution, the market is ready for a new business standard. Somebody is going to create a platform that brings businesses out of the virtual Dark Age and into a Renaissance—and it will be very successful when they do.

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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.

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What is the New Normal for Businesses and AP?

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What do the oracles say about society’s return to normalcy? Bill Gates is pinning his hopes on a semi-normal return to life in the spring of 2021, provided we rapidly adopt the vaccine. Dr. Fauci’s more conservative estimate suggests that we’ll enjoy movie theater experiences, indoor dining, and regular school attendance by late fall.  But the experts’ jockeying of vaccine rollout timelines and predictions of how soon we can reschedule that twice-canceled family vacation leave one fundamental question unanswered:

What aspects of normalcy are actually worth returning to? 

The pandemic’s clarifying challenges to businesses were not thoroughly negative. Post-pandemic businesses have adapted by interfacing with technology to get the same tasks done with less redundancy and bulk. Daily operations have stripped down to bare essentials, some bearing costs to the customer, but many renewed in their devotion to make a more human connection with those they serve. Data security issues took a tremendous and necessary spotlight as a historic number of the U.S. workforce scrambled to telecommute.

Covid-19 shattered all illusions about how quickly any industry, company, or market can change. 

There’s no crystal ball to consult when it comes to making big changes with very little advance notice. Data by McKinsey indicates how businesses stayed lean and financially solvent through the initial shutdowns and subsequent quarantine measures. According to McKinsey & Company, businesses that transformed their processes in 2020 nodded to agility as the key ingredient of their success. In the business sense, “agility” is defined by smaller teams that are built to work with rapid efficiency in place of traditional business models with several tiers of leadership per business unit. McKinsey tracked 25 companies across 7 business sectors in their handling of the COVID-19 crisis.

Here is the resounding sentiment of what they found:

Through our research, one characteristic stood out for companies that outperformed their peers: companies that ranked higher on managing the impact of the COVID-19 crisis were also those with agile practices more deeply embedded in their enterprise operating models. That is, they were mature agile organizations that had implemented the most extensive changes to enterprise-wide processes before the pandemic.

The benefits of agility were measured in overall customer satisfaction, employee engagement, and operational performance. They found that swifter decision-making, less time determining priorities, and faster and more flexible response processes lent themselves to the business’ overall success. In other words, being agile made everything easier.

Nimble, clear-communicating teams enabled with good technology outpaced their slower, bureaucratic counterparts.

A clarion call from a pandemic-tested economy is this: the bustling office setting is becoming increasingly outdated. A small, remote team working closely is capable of outpacing any team that sits less than six feet apart–and with less overhead costs.  This is a matter of understanding the amazing flexibility of a business operations model. With technology, we now have the ability to decentralize while staying connected. Sounds paradoxical, but then again, so did social distancing.

While change is good, identifying the right kind of change is essential. Here are three guiding principles:

1. Keep Your Business Unit Nimble With an Agile Mindset

Examples of an agile mindset include giving up meeting-heavy schedules and manual workloads and renewing decision-making agency in small teams. Even if the organization at large is still insistent on doing things the old way, your business unit can lead to small changes with great effect.  What’s not working with your current accounting operations model in accounting, IT, or even on the executive level? Can you digitize any of your backlogged manual tasks to alleviate the stress on your team and improve supplier relations?

But don’t mistake agility for speed. Speed is fast but can be blind. Agility is about delighting both the customer and those who serve them in the delivery of a seamless and elevated process.

2. Add Collaboration Tools as a Lifeline Resource for Your Team

The 2021 workforce demands exceptional collaboration tools. As projections still hang in the air of remote work persisting into the better part of 2021, it is essential that good communication infrastructure is in place to sustain team morale. Longevity is about more than just crossing the finish line, but lifting burdens of redundancy and frustration. As willpower to stay connected wanes and team needs inevitably change, it is essential that touchpoints are added between managers and employees to prevent burnout and ensure team goals are attainable and appropriate. Ask your team what heaving lifting they need assistance with and keep an eye toward any solution that may bolster cross-functionality and productivity within your team.

3. Retrofit for the Employee of the Future

Whether or not we retain the same jobs we had at the outset of 2020, job demands will have changed. Safety and wellness concerns have skyrocketed in the eyes of the consumer while values like convenience or ease of access have diminished in proportion to the limitations imposed on our lives.  Product models will need adjustment. New verticals that businesses once sought to launch into may have dried up, leaving sales teams to pursue other avenues.

Providing the workforce with more analytical tools, businesses can add value to employee roles by grounding decision-making in data points and allowing for greater transparency to daily tasks. Through new technology, the elimination of legacy technology, needless redundant tasks, and paper touchpoints, the workforce can rest more securely in the face of unanticipated threats to their employability.

Our technology, operating models, and accepted biases of ‘how things are’ must all change when presented with the data on how things can be done differently.

Change is no longer a back-of-the-handbook contingency plan. Grit and ingenuity hold the silver lining to a resoundingly difficult year. Perhaps reversing to the way things were is a farce. The next normal will provide us gradations of clarity as waves of vaccinations roll out and restrictions ease in the late months of 2021. Yet what we do with the clear opportunities already here is a truer prediction of future business success.

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Lauren Ruef has collaborated with Nvoicepay, a FLEETCOR Company to write about financial technology since 2016. Nvoicepay optimizes each payment made, streamlines payment processes, and generates new sources of revenue, enabling customers to pay 100% of their invoices electronically, while realizing the financial benefits of payment optimization.

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

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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.