With Paper Checks Pushed Out, What's Next For B2B Payments?

For years — decades, even — B2B payment leaders and innovators had been talking about the digitization of corporate payments within accounts receivable (AR) and accounts payable (AP) departments. But for many organizations, this trend had been more talk than action.

Then, the pandemic hit, and suddenly the paper check was no longer viable in a work-from-home environment. Indeed, as several chief financial officers (CFOs) told PYMNTS in recent months, no longer could AP personnel be in the office to cut checks, nor could AR professionals be in the office to receive them.

"Manual checks don't exist in a COVID environment," Chegg CFO Andy Brown told PYMNTS last month. "You have to find other solutions."

"Now we have to be concerned about whether [a] customer is late in payment because there's a check sitting in the office and we haven't sent someone to find it yet, or whether they are actually late in payment," another CFO, Rob Goldenberg of 6Sense, told PYMNTS earlier this month.

Accelerated Transformation

In this context, CFOs have emerged as critical leaders within their organizations that had been forced to react quickly to the new normal of remote working and digitization over the past several months. Time and time again, the paper check emerged as a key pain point for organizations that had failed to digitize pre-pandemic. Yet, for many CFOs, ridding the enterprise of the paper check is only the beginning.

The coronavirus crisis has accelerated B2B payments digitization to new heights. According to the PYMNTS CFO's Guide To Digitizing B2B Payments, a collaboration with Comdata published in September, AP departments are leading the charge to embrace digital tools like virtual cards to not merely rid their systems of the friction of paper checks, but to embrace technology that optimizes B2B payment workflows and brings added benefits to their suppliers.

“Chief financial officers (CFOs) have also been adopting digital tools to improve their companies’ supplier management and payment processes,” the Tracker stated. “A June survey of 250 CFOs at mid-sized to large firms found that 72 percent said their staff spend up to 10 hours per week handling new vendor registration, responding to supplier inquiries, issuing B2B payments and tackling other AP tasks.”

In this regard, the B2B payments digitization revolution has the potential to drive stronger buyer-supplier relationships and inject greater levels of efficiency and security into their workflows that bridge the gap between B2B trading partners.

What's more, many of the initiatives spurred by short- and medium-term pandemic impacts are likely going to be adopted for the long term.

"The virus has served as the catalyst to add inertia to the long-awaited electronification of vendor payments," BluePenguin Payments CEO Steven Boyer told PYMNTS in October, pointing to AP as a cornerstone of this digitization shift.

"The movement to electronification is here to stay," he added.

More Work To Be Done

There is no doubt that the global pandemic has moved the needle on B2B payments digitization, but there is far more work to be done.

While CFOs widely agree that there have been years of B2B payments advancement squeezed into only a few months as a result of the pandemic, it is simply not possible for every organization to achieve fully optimal AP and AR workflows in such a short amount of time.

According to Mark Aquilina, senior vice president of Product & Strategy at WEX, many of the strides that AP departments have made have failed to make similar impacts in AR departments.

"There are not enough people focusing on the lack of acceleration on the AR side to match the speed of acceleration on the AP side," he told PYMNTS earlier this month.

Even if and when, paper checks are eliminated from the B2B payments ecosystem, industry experts say there is plenty of friction remaining in other processes and workflows. Corporate Spending Innovations (CSI) President David Disque, for instance, spoke with PYMNTS about the challenges organizations face regarding interconnectivity with their business partners, as well as the friction that exists in moving not only electronic money, but electronic data from one corporate to another.

That's especially true as organizations shift from check to tools like virtual card and ACH, which require seamless integration from one business partner to another to support both payment and reconciliation.

Robotics process automation (RPA) is one technology that could further eliminate such pain points, while collaboration between buyers, suppliers and their banking partners will also be an important part in the continued drive toward B2B payments modernization.

While there is no end in sight when it comes to innovation and progress, what is clear is that organizations have finally made a dent in the effort to eliminate paper checks, and that will be an important starting point as the economy gears up for 2021 with renewed focus on digitization.

"We have a goal of getting to 100 percent digital payments in the foreseeable future, but it can be difficult because you have to have partners willing to pay you that way," Apeel CFO Bill Strong told PYMNTS in July. "Yet it's the way the world is going, and having to wait for a paper check to pay for a critical piece of equipment that needs to be in the field to enable revenue generation doesn't make sense for us."