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Three-quarters of eCommerce Businesses are still Struggling to Optimize their Payments

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Archives, eCommerce, Global Trade Daily

Three-quarters of eCommerce Businesses are still Struggling to Optimize their Payments

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New research from Nuvei and Edgar, Dunn & Company highlights the opportunities Payment Orchestration brings to revenue growth.

Nuvei Corporation (“Nuvei” or the “Company”), the Canadian fintech company, has revealed that three-quarters of eCommerce businesses (75%) say they need greater levels of support to optimize their payments function due to a reliance on an increasing number of payments providers.

This data is available in Nuvei’s latest whitepaper Payment Orchestration: A practical guide to optimizing payment performance. Nuvei partnered with Edgar, Dunn & Company (EDC) to survey over 100 international businesses across a variety of verticals that sell online to consumers.

Capitalizing on the benefits of the multi-vendor model

In an increasingly complex landscape, more than half (54%) of online businesses are now using at least six payment providers to optimize their checkouts as they look to scale into new markets, win new customers, and grow revenue. A third (33%) have direct acquiring relationships with at least five banks.

The rise of this multi-vendor model is a direct result of eCommerce businesses understanding that there is a real opportunity to accelerate growth. Harnessing the power of best-in-class payments technology in every market they operate, and for every relevant payment method, is critical for businesses to optimize their payments performance.

But businesses are also aware that a lack of coordination and optimization of these complex set ups may have a negative impact on their revenues as well, including permanently losing customers. The research shows that 59% of businesses believe that customers who have experienced a false decline will not give businesses a second chance. It also shows that alternative payment methods are becoming more important to eCommerce, with only 23% of online businesses’ checkouts now have three available payments methods or less.

Understanding Payment Orchestration

There is a clear role for payments orchestration in providing the control online businesses need to effectively optimize their backend payments flow. Without Payment Orchestration businesses are unable to set specific and intricate rules for payments acceptance to boost conversion and revenue, and they also do not have full visibility of their performance with which to make informed decisions.

This is evident in the whitepaper research. Businesses told Nuvei they have a variety of specific motivations for implementing a Payment Orchestration solution, including a reduction in the cost of payment acceptance, greater efficiency internally, and a wider acceptance of more payment methods. Many merchants intend to optimize payment conversion with smart routing capabilities to increase revenue.

Nuvei’s practical guide helps eCommerce businesses implement and get maximum value from their Payment Orchestration Platform (POP). When integrated effectively, Payment Orchestration can enable businesses to improve their overall payment performance through enhanced efficiency, security, flexibility, and scalability.

Download Payment Orchestration: A practical guide to optimizing payment performance here.

Methodology

Edgar, Dunn & Company conducted the research in Q4 2022 and in early Q1 2023. This involved conducting primary and secondary research, including the completion of in-depth interviews with large multinational B2C businesses. A survey was also conducted at the beginning of 2023. The survey has been administered online to more than 100 international businesses that sell online to consumers with a sample of respondents working in the finance, payments or commercial fields. The questionnaire included a mix of pre-qualifying information, multiple choices, and open-ended questions regarding their experiences and views on the topic of Payment Orchestration. All data was collected anonymously.

About Nuvei 

Nuvei is the Canadian fintech company accelerating the business of clients around the world. Nuvei’s modular, flexible and scalable technology allows leading companies to accept next-gen payments, offer all payout options and benefit from card issuing, banking, risk and fraud management services. Connecting businesses to their customers in more than 200 markets, with local acquiring in 45+ markets, 150 currencies and more than 600 alternative payment methods, Nuvei provides the technology and insights for customers and partners to succeed locally and globally with one integration.

From Execution to Insight: How Fintech is Shaping the Future of Accounts Payable
Archives, Education, Global Trade Daily

From Execution to Insight: How Fintech is Shaping the Future of Accounts Payable

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You have to spend money to make money. That’s an old adage, and it’s true. But actually making the payments takes up a lot of people’s time. It’s critical to your business operations, but it’s not why you’re in business. 

That means there are opportunity costs. You have to spend money on the spending of the money instead of on revenue-generating activities. 

There are also mindshare costs. Making vendor payments is a brute-force activity. Accounts payable (AP) teams are stuck on a hamster wheel, always having to scramble to get payments out the door and then reconcile them on the back end. They’re dealing with a lot of manual work and multiple partially-automated, partially-integrated systems. They spend a lot of time correcting errors. 

It’s all about execution and dealing with all kinds of administrative details along the way. They don’t have the systems and the visibility they need to work more strategically. 

But within the next ten years, AP will go from brute force execution to strategic decision-making, thanks to new fintech offerings. 

We haven’t really seen true fintech offerings for business payments in the market until recently. To make business payments efficiently, you need three things: money, infrastructure, and process. A true fintech brings all three.

Most companies today still make payments through their banks, and there’s no question that they are at the heart and the soul of payments. But banks only help with about one-and-a-half of those three things. They have all kinds of lending products that can help you fund your spending, so they can help with liquidity. 

They also have part of the infrastructure. They are chartered by governments to steward money and move money around. They invest significantly in licensing, regulatory compliance, networks to move money and data, and fraud protection.

But there’s one big piece of B2B payment infrastructure that they don’t have: vendor networks. That has meant that it has been up to each individual company to conduct its own enablement campaigns to move vendors to electronic payments. That’s holding companies back. 

Fintechs are now building B2B vendor networks at scale. Companies can plug right into them and start paying about 80 percent of their vendors electronically right out of the gate.

Where banks really fall down is in the area of process. Process automation is where technology companies, on the other hand, excel. We’ve seen a lot of ERP, procurement, and invoice automation vendors start to offer payments as an add-on. It makes sense because people are already using their software to automate the workflow that leads up to the point of payment. But the software providers do not have vendor networks or the ability to offer liquidity.

This is why making vendor payments is such a disjointed process. Up until recently, no provider has offered the combination of the “fin” and the “tech” needed to address the process from end to end.

Today’s fintechs deliver technology and services that take costs and inefficiencies out of the process. They give AP teams visibility into the status of approvals and payments. But most importantly, they free up mindshare for them to be able to use payments as a strategic lever.

AP teams can get out of the payments processing game and still have all the visibility and control they need to run the business. They have the insight they need to become a management- and decision-making group. They have time to think, versus just trying to keep things moving. 

They can use their knowledge of the inner workings of the company to contribute in any number of areas – cash management, job cost accounting, and cost and process optimization. The efficiency gains, combined with increased rebates from leveraging the B2B vendor network to pay more vendors by card, can turn the back office from a cost center into a revenue generator. 

For far too long, companies have had to live with a set of back-office deficiencies that they are well aware of. They recognize the challenges of working with disparate systems. They know there’s too much manual, non-value-added work, and that the time-intensity on error remediation is significant. They’ve resigned themselves to these deficiencies because it’s been that way for decades, and there hasn’t been a better way. 

There is now. It’s been a long time coming because business payments are complicated. To really solve the problem, you need to be a true fintech with a complete set of assets – the relationships with the banks and the credit card companies, the network, and the technology. You need to have them at scale because the volume of B2B payments is massive. It’s a new solution that’s been 50 years in the making. It means that vendor payments don’t have to be suboptimal anymore.

Rick Fletcher is Group President of Corpay Payables, which enables businesses to spend less through smarter payment methods.

 

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Archives, Education, Global Trade Daily

How to Tackle the Top 3 Challenges in Business Payments

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Working with multiple systems, the growing threat of fraud, and the lack of visibility into data are the top three challenges treasury professionals face with business payments. That’s according to the Strategic Treasurer 2022 Global Payments Survey of over 230 treasury and payments professionals. 

These challenges are not surprising. The pandemic put the push to digitization into overdrive. However, adding more electronic payment types and digital systems creates more workflows and disparate sources of data to an already complex operation. At the same time, the rise in ACH payments has unleashed a new wave of sophisticated business email-compromise schemes. With so many people changing jobs since the pandemic, these challenges are now even more acute.

What’s perhaps surprising is that these concerns rose to the level of “top challenge” for companies far more frequently than concerns such as maximizing card rebates and vendor discounts, and utilizing different payment types to optimize working capital. 

These are still important, but not nearly as important as making sure the day-to-day process of managing payments works smoothly. These findings of the study square with the top challenges we see working with treasury and payments professionals.

Challenge 1: Using multiple systems

The top challenge, cited by 58% of respondents, is that they’re working with multiple systems. That is difficult when systems are not fully integrated, and just 5% of respondents said their ERP system was fully integrated with their banking platforms. Nearly 90% said there was some integration, while 21% said their ERP system is not connected to their banking platforms at all. 

What we see is that having systems that are not fully integrated means teams find themselves having to run overlapping processes. They’re toggling between systems and exporting data from one system to a spreadsheet and manually uploading it to a different system. 

At the same time, they’re managing a different workflow for each payment type or program. More than 80% of respondents are originating payments with more than one bank. More than 75% use bank portals for payment connectivity, and 48% cite banks’ complex formatting requirements as a challenge.

Challenge 2. Security and fraud management

Preventing fraud is more of a challenge for smaller firms, with 55% citing it as a top concern compared to 36% of those at large firms. What we’re seeing is that smaller companies are experiencing more of these email-based attacks, probably because their systems and processes simply can’t keep up with fraudsters’ pace of innovation. The fear of an attack is greater because the impact to a smaller company is much bigger.

A larger company with a big balance sheet can weather a fraudulent attack more easily, but it can put a real strain on a smaller company. At Corpay, we have processes in place for helping our clients recover fraudulent payments. A lot of small companies can’t afford to lose access to their money for that long. 

Challenge 3: Accessing real-time, accurate data

Getting real-time visibility into payments data seems to have risen in importance, with 43% of respondents saying it is a top challenge. This is perhaps a sign of changed expectations in a world that is becoming increasingly digitized. It wasn’t that long ago that most vendor payments were made by paper check. In that world, real-time visibility was just a pipe dream. 

As the rest of the organization digitizes and decision making becomes more data driven, there’s greater demand to provide more timely financial data. 

But the challenge isn’t confined to slower reporting. Reconciliation takes longer, which means that job costing takes longer. In industries like construction, where costs are passed through to the customer, that means that billing is delayed. That, in turn, creates challenges with cash management. 

What’s interesting is the extent to which the top three challenges are interrelated. It’s hard to deliver timely, accurate data when you’re working with multiple systems and there’s no standardization. The level of complexity that people are managing creates constant time pressure, giving fraudsters an opening to slip in. Furthermore, delayed data can prevent daily reconciliation, which is one of the best practices for catching and recovering fraudulent transactions. 

The linkage between these challenges suggests that the same solution can eliminate many of them. Companies seem to be moving in that direction. The top investment areas are AP automation, which could include invoice and/or payment automation, and payment services. 

Payment automation allows customers to wrap up disparate payment processes and bank connections into a single workflow. AP only needs to transmit one file to the payment provider, and they receive back standardized remittance data. Using APIs, file transmission can be initiated from the ERP system and the remittance data drops right back in there. 

Outsourcing payment services is a more robust solution, encompassing automation, vendor enablement, and data management within a B2B payment network. Payment service providers also handle time-consuming, back-end issues such as error resolution and escheatment. What we typically see with customers who go the outsourcing route is a 75-80% reduction in time spent on payment processing.

There’s a talk track in the profession about turning accounts payable from cost to profit center through increased credit card rebates. The promise of high rebates on spending you’re already doing is attractive. But if your processes are still largely manual and you’re having to hire extra staff to run the process, that can easily cancel out the gain. And it doesn’t position your organization to scale. 

The responses to this survey make it clear that the first order of business is to make sure the process actually works in a scalable, reliable manner with the required protection and visibility. Solutions that address vendor payments holistically and simultaneously streamline complex processes, reduce fraud risk, and give you visibility into the status of all your payments. That, in turn, greatly improves your ability to manage working capital, capture discounts, and make more payments via credit card, thereby increasing rebates and helping you meet your cost cutting goals.

Sven Hinrichsen is SVP of Strategy for Corpay Payables, which enables businesses to spend less through smarter payment methods

 

 

 

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4 Ways Startups Can Boost Sales

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As a small business owner, finding ways to increase profit and your audience reach efficiently is key. Entrepreneurs need to understand the sales process and know the ways to manipulate it in their favor. 

Luckily, there are ways that small businesses can generate leads and boost sales on a budget, to grow and achieve business targets. In this article, we look at four ways you can boost sales for your new startup.

Create a detailed content marketing strategy

Developing an engaging content strategy will help you generate leads and also build authority in your industry, whether it’s an informative eBook, regular blog content or user-generated videos or images that can be shared easily. But beyond creating great content, you need to know how and where to distribute that content to ensure it gets seen by a wider audience. 

To get more out of the content you develop, you can find ways to repurpose it for social or email to promote it to new and existing audiences. A blog post, for example, can be turned into graphics for Instagram or made into a video for your YouTube channel.

Having a detailed content marketing strategy that has been designed with distribution in mind will make sure your brand draws the attention of the right customers and directs them back to your business.

Provide convenient payment options

The logistics of accepting card machine payments can be a hurdle for startups, but if you want your business to be a success and increase revenue, you need to provide convenient payment methods for your customers. The payment process for your business needs to be easy to use, so as not to alienate customers, and should also be multifaceted for convenience – you want to capture every sale possible, which requires choice for your audience.

Today, most consumers take it for granted that businesses will offer card payments, whether it’s in-store or online. In fact, the UK is the world’s third most cashless country, so neglecting to offer card payments could negatively impact your bottom line and result in you capturing a smaller percentage of potential sales. Being able to accept card payments is vital in order to avoid risking lost sales. 

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(via Forexbonuses.org).

Cultivate a positive reputation

The internet enables us to be more informed than ever before, and this can be both a blessing and a curse for businesses trying to generate sales. Startups have the opportunity to foster a positive brand image and reputation from day one, which can be put to good use in influencing future customers. 

In prioritizing a great customer experience and encouraging customers to leave feedback and reviews, businesses can cultivate a great reputation that will serve them well in terms of sales and customer loyalty. 

There are various ways that small businesses can make a good impression, from asking customers for feedback and then taking appropriate action to improve where necessary, to asking for testimonials when a customer has a positive experience or when their expectations were exceeded. 

Entrepreneurs should take the time to respond to online reviews too, which demonstrates that the business cares about its customers and their experience with the brand. 

As consumers, we rely on reviews and testimonials to forge our own decisions when it comes to making a purchase or using a new service, so in taking the time to cultivate these types of social proof, you can increase the likelihood of bringing new customers to your business. 

Utilize social media

Social media can’t be ignored, for its ability to build a community to the different avenues it provides, and for businesses to reach a wider audience. For startups, however, the main appeal of social media is how cost-effective it is for such big rewards. So many consumers are spending a lot of their time on these channels, so it can be an enormous boost to sales when it’s used correctly. 

Most social media sites have a wealth of data on their users, which businesses can use to get their messaging in front of the right eyes. And while not everyone uses social media to buy, it can be a highly effective way to promote products and services, especially if you can offer giveaways, discounts or special deals to grab your customers’ attention for more sales. 

For startups, developing a social media marketing strategy early on can be a great way of marketing the business on a budget while still enjoying great results. 

Final thoughts

Startups often need to get creative with their strategies in order to keep budgets low while still enjoying growth as a business. Focusing on finding high-impact yet cost-effective methods to build brand awareness, and consequently, sales should be the aim. 

Startups should use a combination of these tips and then analyze how each impacts sales to determine where efforts should be placed for better results in the future. 

___________________________________________________________________

Harvey Holloway is a digital marketing specialist, with a 1st class honours degree in Digital Media Design. Harvey is now looking to connect with leading publications and share his experience with a wider audience. Connect with Harvey on Twitter: @HarveyTweetsSEO.

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Archives, Banking, Global Trade Daily

How to Make Important Adjustments to Your Payment Strategy

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The first couple of weeks of sheltering in place regulations saw finance and accounts payable organizations scrambling to set up remote operations and get payments out the door. Most were able to accomplish these goals quite well. Now we’ve moved into the next step–establishing efficient workflows and productive practices. It’s still challenging, however. Companies have to find ways to keep people safe while executing paper-based processes that keep their teams office-bound. For example, many companies still have to go into the office to pick up mail, circulate invoices for approval, and prepare checks for mailing.

They also must consider the best way to move forward and develop strategies for managing their teams through economic uncertainty. The Conference Board, a non-partisan economic think tank, recently sketched out three possible scenarios. Their best-case scenario predicts a 3.6% decline in US GDP for 2020, while the worst case would see a 7.4% decline. In other words, nobody knows what the next six to 12 months are going to look like.

That means AP needs to focus on conserving cash while keeping operations moving. They can expect more calls from suppliers since Accounts Receivable teams typically ramp up their efforts in tough times. They need to prioritize payments and capture early pay discounts. Procurement is going to reach out to try and renegotiate prices or terms. Treasury is going to be very interested in the timing of payments and managing working capital. It’s on the AP team’s shoulders to make sure they’re engaging with these teams and coordinating efforts.

At the same time, they’ve got to consider the efficiency and the productivity of their own team as we continue to work remotely. Among other things, that means coming up with a strategy for shifting to electronic payments at scale.

Many organizations have had this goal for a long time, but, depending on the research you look at, around 40 percent of business payments still issue by check. This number is down from a decade ago, but still problematic in a remote work environment. So why don’t businesses pay more of their suppliers electronically? Well, as everyone who rushed to shift suppliers to ACH payments when shelter at home orders took effect has learned, you can’t just flip a switch and move all your suppliers.

It’s easy enough to find a bank to handle ACH transactions for you. It also sounds a lot cheaper upfront than checks—if you only look at transaction processing costs, which are usually well below $1.

But with ACH, you have to enable your suppliers one by one, and then store and update their data securely. That becomes a fixed cost because there’s a constant churn of suppliers and their bank data–changes usually around once every four years per supplier. You should also expect to manage exceptions that arise with ACH file submissions and more nuanced supplier questions.

Thinking ACH is cheap or straightforward is one of the biggest misconceptions holding companies back from paying electronically. That’s not to say you shouldn’t make ACH payments. That said, they should be part of a holistic strategy that addresses the entire payments workflow, encompassing all forms of payment, including international wire payments.

What does that look like?

Card first

If you’re going to reach out to suppliers to enable them for electronic payments, you should first ask them to accept payment by credit card.

Virtual cards–sometimes known as single-use ghost accounts or SUGAs–are not as well-known as they should be in finance and accounting circles. Still, they can be an incredibly valuable part of your payment strategy. Unlike P-cards or company-issued credit cards, virtual cards exist to pay suppliers easily. Each card has a unique number that can only be used by the assigned recipient in the designated amount. That provides AP with substantial control and makes it one of the most secure, fraud-proof payment methods. You also should expect to receive rebates to offset some of your AP costs.

The main challenges are enablement and outreach, which don’t require significant effort on the part of AP teams since virtual card payment and remittance are relatively straightforward for suppliers. All that’s left is to structure your rebate program to support your team’s efforts and then some.

ACH for most

If a supplier declines to accept card, which often happens due to the interchange fee, your second request should be to enable them for ACH. Most vendors will say yes to this; in fact, they’d prefer it to check. Just be sure you have a realistic appreciation of the true ACH payment operating costs, including enablement and data management, as well as fraud support.

Check for holdouts

While the number is dwindling, there are some suppliers with a ride-or-die mentality who won’t accept anything but checks. For these suppliers, an outsourced payment provider can do a print check from an electronic file, so your team doesn’t have to handle all the paper.

Your payment strategy should include automating the payment workflow. Fintech ePayment providers wrap these disparate workflows into one interface so that all AP has to do is click “pay.” Then their payments will issue to their suppliers in the method they elected to receive. Because these platforms are in the cloud, payments can be approved and scheduled remotely, with visibility for multiple team members.

Heightened fraud protection

Your payment strategy should also include fraud protection. The pandemic, the move to remote work, and challenging economic conditions have created a perfect storm for a rise in all types of crime, including payment fraud. It’s essential to have strong internal controls, especially now that sensitive information is residing in your teams’ homes and on their personal networks. Preventing theft is a key component of cash management.

It used to be that organizations mainly worried about check fraud, and that’s still a problem, but it’s reduced quite a bit thanks to controls such as Positive Pay, Positive Payee, and watermarks on checks. So far, there aren’t similar controls for ACH. As businesses have gravitated towards ACH solutions, such payments have become more of a target for fraudsters. That’s a problem because the funds move faster, making it much harder to recover a fraudulent ACH.

Business Email Compromise (BEC) schemes are the most common type of attack. These involve fraudsters masquerading as suppliers, company executives, or other high-ranking personnel, requesting that funds route to a new, fraudulent bank account. We’re already seeing that the pandemic has provided BEC scammers with new material to convince an overwhelmed AP to comply with these requests.

To protect your team, you need a partner who can support your enablement and fraud protection goals, so your team can stay focused on cash management.

Finance and AP have long intended to go electronic, but the transition has been slow. It’s not just the flip of a switch or the sudden addition of a new payment type. Very few businesses realize how strategic the shift is until after they’ve committed to an update. Many companies that don’t plan accordingly have had to revert to check payments when they realized the actual cost and effort it takes to switch suppliers over. Rather than trying to attack a single pain point, you have to address the whole process from top to bottom.

Now we are going to see an acceleration of this shift with the remote workforce and challenging economic conditions. There is a new imperative, and there is also new technology. Interestingly enough, a lot of the fintechs providing B2B payments technology got their start during the great recession, when the financial system collapsed, and cloud technology was being born. These are now mature companies, ready to “cross the chasm” and transition their partners to 100 percent electronic payments.

________________________________________________________________

Derek Halpern is the SVP of Sales for Nvoicepay. He has over 20 years of technology sales and leadership experience, including 16 years in the fintech and payments space. Derek’s previous positions include VP of Sales at Billtrust, an AR automation technology company, and Sales Director at TranZero, a payments company. Previously, Derek co-founded a company called ProService Software, which was sold to Solomon Software. Derek became the Western Region Sales Manager for Solomon following the acquisition. Derek earned a BS in Business Management from Pepperdine University.

Josh Cyphers is the Vice President of Product & Strategy for Nvoicepay. 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 was a Senior Manager and Consultant at Microsoft, Vice President of Finance at Visa, and Business Planning and Analysis Manager at Nike. Josh is a lapsed CPA, and has a BS in Economics from Eastern Oregon University.

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How to Take Charge of your Cash Flow

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Small business owners in nearly every industry struggle with cash flow and how to best utilize their working capital. Nearly 60% of failed businesses cite cash-flow issues as a primary reason for their failure, which shows how cash flow management can make or break your business.

Here are 4 ways you can set your business up for cash flow success:

Better manage your inventory costs

Inventory can significantly sway your ability to stay on top of your cash flow because there are so many moving pieces to consider: Whether your business benefits from keeping inventory long-term or selling goods quickly, how much it costs to store and how much you can save by buying in larger quantities, are just a few considerations.

Regardless of the best inventory management strategy for your business, it is critical to keep a line of credit on hand to take advantage of the best deals from a vendor or ship items out quickly to maximize customer satisfaction.

Negotiate payment dates with your inventory suppliers to align with your known cash-ins and outs so you know you will have cash on hand to make your payments on time.

Get paid faster

Late payments from customers can really hurt your ability to manage your business, yet they are all too common. Worst of all, late payments create gaps in cash flow which can affect your ability to keep your business moving.

It is important to make sure you are using the best practices to invoice promptly and thoroughly. Using an online tool can reduce room for human error by automating recurring invoices, ensuring you send a confirmation of receipt and track to follow up.

Offering multiple, convenient ways to pay can reduce the payment cycle and improve your customer experience. With payment technology developing so quickly, you can find affordable payment solutions that help you accept payments in ways your customers like to pay, increasing the probability of more business and prompt payments.

Seek out same-day settlement options

Whether you’re borrowing or getting paid, new technologies allow small businesses to access the capital they need faster. FinTech companies are partnering with solutions such as INGO Money to receive loan funds immediately, allowing business owners to manage unforeseen expenses as they arise or on the weekends when typical bank transfers aren’t possible.

New solutions allow for same-date settlement of payments, too. Usually, business owners receiving credit card payments through customers would need to wait up to 72 hours for those funds to hit their accounts. Seek out solutions that offer a same-day settlement to ensure you have access to the funds you earned sooner.

Refocus your time on your business, not your books

A study of 400 small business owners showed that more than 30% of businesses will seek investments in new technologies to improve productivity. Consider how a similar strategy could make an impact for your business. Every hour spent selling your products and working with customers instead of managing your books is another hour you can proactively increase sales for your company, and, effectively, your cash flow.

Most new technology solutions are focused on solving this issue while providing greater customer experiences than previously available in the market. New lending solutions give you an approval in minutes, payment solutions reduce the time to be paid and disbursements are now nearly immediate. All of that adds up to more time available to business owners to focus on doing what they love and selling.

________________________________________________________________

Aditya Narula is the head of customer experience at Kabbage.  Kabbage has pioneered a financial services data and technology platform to provide access to automated funding to small businesses in minutes.  Since 2011, the company has helped more than 200,000 small businesses access more than $8 billion. 

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How to Make the Case for Optimizing Invoice Payments

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What I’ve learned working in sales for a bank and two financial tech companies is that when it comes to payments, there is a clear difference between fintechs and banks. Banks look at business payments as a product, while fintech see them as a process to be optimized. 

What does that really mean? Optimization is a term we throw around a lot, usually in relationship to costs or processes. Costs are relatively easy to optimize, because they’re easy to see and measure. The business case is simple to make.

Making the case for process optimization is a lot harder, however, because the costs are hidden and hard to measure. And when we get really good at running a process, we no longer realize just how complicated that process really is. We’ve got something that’s working, so we keep doing it the same way. If we think about optimization at all, we look at pieces of the process and see if we can make them faster or cheaper. But then we often overlook new technology that can radically change or even eliminate part or all of the process. 

A serious dent

For example, smart phones have radically changed and/or eliminated the use of alarm clocks, radios, landlines, paper calendars, cameras, feature phones, weather reports, and more. Those all still “work,” but why have all those different pieces and processes for each when you could have a smart phone? 

Few people, if any, make the effort to figure out how much time and money they save by switching to a smart phone having all that functionality in a single portable device. You’d have to add up the hard costs, break down each process into its component parts, and then assign a value to the time you spend on each. No one would do that, because by now just about everyone realizes that smart phones offer a faster, easier, more convenient way to do things. But that’s exactly what you have to do to make a case for changing a business process.

To make the case for optimizing the B2B payment process, you need to evaluate three key areas: 

Transactional costs. This seems pretty straightforward: what does it cost to send an ACH or wire, or print and mail a check? This cost includes transaction fees, check stock, envelopes, stamps. But there can be additional fees for delivering standard or upgraded remittance information, PositivePay, returned checks, and research on lost or erroneous ACH payments. Be sure to consider all of these when making your business case.

Rebates. This also seems straightforward: how much spend can you get on card, and what’s that likely to yield in rebates? But there are some nuances. First, not all rebates are the same—they vary in terms of rules and payout percentages. Some rebates don’t kick in until you hit a certain threshold, while others pay out monthly, annually, or semi-annually and you must figure in the time value of money as well. Others pay less if you don’t choose to pay your balance off daily or weekly. Then there are exceptions like Level 2 and 3 processing and large ticket charges. I would suggest taking a look back at previous years to see what you actually earned vs. what you remember from the sales pitch.They are often vastly different.

Operational efficiency. This is where you can get sucked down a rabbit hole. But it’s also where you can really transform your business. Let’s take a look at all the pieces of the payments process:

Enabling suppliers for electronic payments. What does your go-to-market strategy look like?  Is it phone calls, mailers? Does your AP team participate?  Your procurement team? How many vendors accept card? ACH? Who collects, keys in, and updates the banking information? How is it secured? 

Creating payment files for transmission. How many different file types must IT work to create and test, and how often are you sending? How long does it take, and who does it?  Is the approval built into the system? Or is it manual and paper-based?

Collecting physical signatures on checks. How many people are involved? How much time do they spend? What is their hourly pay rate? 

Sending out remittance advice. Is it stuffed in envelopes and mailed? Emailed? Is it automatic or do you need to create, save to desktop, and manually send?

Fielding phone calls asking about payments. How many calls do you get per 100 payments sent? What’s the average time to fulfill a request? Who’s involved, and what’s his or her pay rate?

Tracking down and reissuing lost or erroneous payments. What’s your error rate per 100 payments sent? Who fixes errors, how long does it take on average, and what is his or her pay rate?  

Early payment discounts.  How often are you able to take advantage of terms offered by suppliers? What is the lost revenue opportunity when the payment process causes you to miss out?

Late payments. How many payments are late? How much are you paying in late fees? What is the effect on your discount and vendor relationship when payments are delayed?

Updating supplier banking and payment information. According to Nvoicepay internal data, suppliers change their banking setup about every four years, meaning you’re updating 25 percent of suppliers annually. But in this day and age, you can’t just accept supplier updates at face value. You have to validate those requests to make sure it’s not fraud or phishing. Who handles that, how long does it take, and how much do they get paid? Do you have a liability policy for fraudulent payments? What has fraud cost your business historically?

Escheatment and unswiped cards. This is the time spent following up on uncashed checks or un-swiped card payments and reissuing them and/or reconciling them back into the accounting system.

How much does it all add up to? Very few organizations really know. There are benchmarking studies out there on the costs of writing checks, and of processing invoices. But no study I have seen recently considers the entire process, beginning with supplier enablement and ending with a reconciled payment. 

Processes and sub-processes

Those detailed studies don’t exist because it’s difficult to discern how much time an AP team spends on all the required processes and sub-processes for completing a payment. Those task hours are often dispersed across the team and can be tough to measure. 

In accounts receivable, for example, there are staff members that only do cash application. So if you make your cash application process 70 percent more efficient, and you have a headcount of 10, it’s easy to say “Okay. I can assign a savings number to that and reallocate 6 or 7 people.”  It’s pretty straightforward.

That’s much more difficult to do on the AP side. For most companies, no role within AP focuses solely on handling errors, enablement, fielding phone calls, or escheatment. Team members need to be pulled from other duties to cover those tasks. I’ve even seen teams pull staff from the manufacturing floor to stuff envelopes during Friday check runs. It’s hard to adequately quantify the time that goes into all these components, let alone understand all of the costs that roll into the payment process. And why would you if you think your method works and there are no viable alternatives? 

The Fintech A-ha

There is a better way. Over the past decade, fintechs have made steady progress in optimizing the B2B payments process. Payment automation providers can now offer a single interface for all payment types, eliminating the need for multiple payment files.

Some, like Nvoicepay, use cloud networks to handle supplier enablement and information management securely at scale, taking those tasks off of AP’s plate. We even service the payment on the back end, handling incoming calls and error resolution. 

The combination of technology and services radically changes the process, eliminating some of AP’s most time-consuming and unproductive tasks, and freeing up staff time for higher-value work.

And that’s the fintech difference. Slowly but surely, technology companies have surveyed the fragmented financial services landscape and figured out how to knit processes together to replace complex, repetitive, non-value-added manual activities with a few button-clicks. To truly optimize business payments, you need to look beyond stamps and envelopes and consider the entire payment journey. Only then can you truly understand the massive optimization opportunity in front of you. 

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Kristin Cardinali is the Vice President of Enterprise Sales in the Midwest Region at Nvoicepay. Her experience in sales and sales leadership spans 16 years, and includes positions held with companies like Capital One and Billtrust. With Nvoicepay, she delivers scalable payment solutions to enterprise companies and other large organizations. Kristin has received several accolades, including Sales Rep of the Year & Quarter, and multiple President’s Awards.

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How to Find Your Way in the World of International Payments

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Credit card, direct deposit, check, cash, e-pay… making domestic payments is a breeze these days, with enough flexibility to offer optimization based on your vendor’s payment preferences. International payments, on the other hand, are much more complex, and bring to mind painful images of cumbersome wire submissions.

Alternate options, such as fintech solutions, enable companies to submit all their domestic and international payments in one file. If the fintech also includes vendor maintenance as part of their services, then the payment file draws banking details from the fintech’s vendor network, eliminating the responsibility of maintaining that data from AP teams’ plates.

But before we delve too deeply into the process, let’s take a step back and explore nomenclature. Over time, companies have imposed their own internal vocabulary over common terms. Terms like ‘wire’, ‘direct deposit’, and ‘ACH’ are often used interchangeably, even though they operate differently. Let’s synchronize our understanding of these words.

What’s in a name?

International vs. cross-border vs. FX

“Cross-border payments” is a self-explanatory term—the definition is right in the name. These funds cross international borders to reach their destination.

“International payments” also describes cross-border payment activity, but carries other specific interpretations as well. For example, it may also refer to funds transferred within a single country through a bank or fintech located outside of that country (e.g. Canada to Canada, but through a U.S. fintech).

The term “FX” (Foreign Exchange) is occasionally thrown around to describe international payments, though it typically refers to currency exchange instead of the transmission of funds.

At the end of the day, as long as your company recognizes the nuances, the use of any term is fine. For simplicity’s sake, the rest of this article will refer to “international payments.”

Stepping out of history and into the future

Wire vs. EFT

Wire is the most popular and recognizable form of international payment processing. From a simplistic, yet technical standpoint, wire payments transmit account data from one bank to another. It’s sometimes the only method for sending money from one country to another, especially when working with specific currency exchanges or infrequently paid countries.

The term “EFT” (Electronic Funds Transfer) is quite a bit broader. It is a catch-all phrase used to describe any electronic payment process. Wire, ACH, direct deposit, and other methods fall under this umbrella.

Standardized codes

Codes are commonly used to determine various international payment factors. Use of the wrong codes can cause downstream payment issues, so it’s worth identifying each type, since they often appear to be very similar to one another.

Country Codes

ISO (International Organization for Standardization) country codes are country-specific abbreviations with varied uses.  Although three ISO country code variations exist—ISO Alpha-2, ISO Alpha-3, and ISO Alpha numeric—the ISO Alpha-2 code is used most in the international payment scope, in IBANs and SWIFT codes. 

As the name suggests, ISO Alpha-2 codes are 2-character codes assigned to each country for identification purposes.  For example, the United States is “US”, the United Kingdom is “GB”, and China is “CN.”

Currency Codes

Currency codes are 3-digit codes that identify currencies. Their resemblance to ISO Alpha-3 country codes may cause confusion, so it’s always worthwhile to make sure you’ve got the right code before adding it to payment instructions.

For example, the ISO Alpha-3 country code for the United States is “USA” while the currency code for U.S. dollars is “USD”. Similarly, “CHE” is the ISO Alpha-3 country code for Switzerland, while the currency code for Swiss francs is “CHF.”

Payment specifications

Information requirements for international payments are far less cut-and-dried than those for domestic processes. The details often vary depending on the payment type, currencies, and the countries involved.

SWIFT/BIC Codes

Veteran AP personnel are likely very familiar with the SWIFT system (Society for Worldwide Interbank Financial Telecommunications), which is known as the BIC system (Bank Identifier Code) in some countries.

SWIFT codes were introduced in the ‘70s as a way to streamline the global money-transferring process and reduce the possibility of human error. SWIFT codes are a series of characters that identify the bank, country, and branch location to which a payment should be sent. Decades later, they still play a significant role.

Routing Numbers

While SWIFT codes are still essential to send international payments, the growing financial industry has highlighted the need for additional details.

Routing numbers are the collective answer, and play a fairly large role in the modern payment structure.

The caveat is that they may not always be called “routing numbers”, which is a U.S. term. For example, Australia has the “BSB Code”, China the “CNAPS”, and India the “ISFC Code”.

While it may seem redundant to provide both the SWIFT and routing details, it is an excellent way to clarify the payment destination.

IBANs and Account Numbers

IBANs (International Bank Account Number) arrived in the ‘90s as a way to further standardize banking information, and have been adopted primarily by countries in the European Union, the Middle East, and several countries in Africa. While IBANs vary in length depending on the country, they contain these common factors:

–ISO alpha-2 country code

–Check digits

–Bank identifier

–Branch identifier

–Account number

Because IBANs often include the bank identifier (which shares digits with the SWIFT code), further account information isn’t typically necessary, which massively simplifies the payment process.

Countries that have not adopted the IBAN must still provide the SWIFT code, routing details, and the account number, as well as any country-specific requirements with their invoices.

Country-specific details

Additional details can include purpose of payment, tax documentation, and company phone numbers, amongst other things. Since each country requires specific information, it can be tricky to know exactly what to supply.

When in doubt, ask your payment solution provider—they can outline each country’s requirements, as needed.

Putting it all together

While international payment processes have evolved over time, the task is still nothing to sneeze at. Fortunately, fintechs like Nvoicepay have simplified the process, and store and maintain banking details on your behalf. That way, when you’re ready to pay your international vendors, you’re good to go in just a few clicks of your mouse—no more painful single-payment submissions through the bank.

Alyssa Callahan is a Technical Marketing Writer at Nvoicepay. She has four years of experience in the B2B payment industry, specializing in cross-border B2B payment processes.