73% of Procurement Professionals Say Late Payments Strain Business Relationships
Firms that have yet to digitize their accounts payable (AP) and accounts receivable (AR) processes are likely to be at more of a competitive disadvantage soon, and late payments can add unwanted friction into their supplier relationships.
Seventy-three percent of procurement professionals said late payments strain business relationships, according to the “Next-Gen Digital Payments Report,” a PYMNTS and Transcard collaboration. Fifty-nine percent also stated that their suppliers have either reduced or outright stopped offering discounts because of late invoices.
Get the report: Next-Gen Digital Payments Report
This means most companies can’t receive crucial benefits like discounts to keep their costs low, further weighing on supplier relationships and hampering cash flows. In addition, late payments can create lingering problems for businesses in terms of their reputations within their industries. These disadvantages make solutions imperative.
Removing Roadblocks That Hamper Payments
Healthcare, for example, has seen digital transformation on not only the consumer-facing side, but also on the provider side. Healthcare companies have been pursuing acquisitions to bring the digital and physical experience together, including diagnostic tools that provide data to doctors as well as tools that make providers’ interactions within their own financial supply chain easier.
Read more: Healthcare Demands Solutions to Complexity
Digitizing B2B payment processes is no easy task, but it’s becoming more necessary for companies operating globally. Organizations continue migrating toward digital channels and are beginning to incorporate newer technologies to assist their AP and AR processes.
Incorporating newer technology also provides financial benefits. Paper-based invoices cost companies about $170,000 per year on average, as well as 125 labor hours per week, making them one of the top sources of friction for businesses’ AP processes.
PYMNTS research found that 53% of small- to medium-sized businesses (SMBs) plan to automate their invoice delivery processes. Interest in solutions like enterprise resource planning (ERP) systems is also growing.
Overhauling Back-End Processes
ERP systems connect companies’ solutions that were previously siloed, making them particularly beneficial to businesses’ financial processes. Using ERP systems to manage AP and AR functions can give businesses greater transparency and enable them to process invoices and client payments more quickly.
Technologies such as artificial intelligence (AI) can work alongside ERP systems to accelerate payment speed, leading business executives to examine back-end use cases for the technology. The adoption of AI and related technologies in the B2B payments space is likely to grow over the next few years.
Leveraging these solutions to aggregate financial processes can help companies more transparently track their incoming and outgoing transactions and allow them to flexibly respond to clients’ and suppliers’ needs.
Businesses are beginning to realize that it is necessary to overhaul their back-end processes as they move their B2B relationships and payments online. Companies that do not make these shifts will fall behind their more tech-savvy competitors as the industry continues to change.