At best, an inefficient accounts payable process can result in delayed payments or limited visibility into spending. At worst, it could lead to misrouted payments and an increased probability of fraud. Yet many organizations still rely on outdated AP processes—jeopardizing relationships with the suppliers that keep their business moving.
In a recent PaymentsJournal podcast, Marchelle Becher, Business Development Executive at B4B Payments, and Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, discussed the obstacles businesses face in the AP process, the role of prepaid and virtual cards in payouts, and how a unified payments platform can streamline accounts payable.
Holding on to Outdated Systems
One of the main challenges with many AP processes is that they still depend on manual invoices, requiring a high degree of administrative involvement. They also often rely on siloed systems.
“There are so many companies that have multiple banking accounts or solutions,” Becher said. “It’s very fragmented. We see that there’s an increase in reconciliation errors in general, and they’re still using older payout methods like wires and writing checks and ACH. Today we’ve got so many other solutions that streamline the whole process.”
Many companies continue to use outdated procedures because, despite their flaws, they have mostly been sufficient. As a result, businesses have chosen to invest their time and resources in other areas, such as improving the customer experience.
Additionally, there is often a reluctance to innovate in a process that could impact both an organization’s finances and its partnerships. These concerns have been amplified by an increasingly stringent regulatory environment.
However, both businesses and suppliers have become more aware of new payments technologies through their experiences as consumers. The rise of digital payments—easily initiated through an app and settled in near real-time—has many users wondering why this functionality isn’t available in B2B payments.
“Consumer payments experiences are driving what’s expected in commercial payments experiences,” Thomas said. “This is definitely one area where getting outdated is a concern, because you’re falling behind where people’s expectations are for the technology.”
Standing In Sharp Contrast
These technologies can bring dramatic benefits to the AP process. For example, the flexibility of prepaid and virtual cards stands in sharp contrast to traditional payment methods such as wire transfers and paper checks.
“It definitely reduces the lag time in processing payments, transactions settle immediately and finance teams have real-time visibility into cash flow,” Becher said. “Prepaid and virtual cards are going to reduce the time it takes to write checks, and there’s also more controls around them—you can send a virtual card out that can only be used online, or it could be just a one-time use card as well.”
A virtual card can be configured with restrictions—such as use at a specific merchant or for a set amount—enhancing control and reducing risk.
Similarly, a key feature of a prepaid card is its ability to limit the funds disbursed. With a digital prepaid card, the payout is available for immediate use and can even be loaded into a digital wallet.
With both virtual and prepaid cards, organizations retain recourse if a payment is made in error or in the event of fraud. For instance, if a supplier short-shipped an order or a contractor failed to complete the expected work, the company could retract or adjust the payment.
Fraud risk is further reduced, as no bank account information is exchanged when using virtual or prepaid cards.
“The card can come completely hashed, so nobody is disclosing any financial information on either side of the two counterparties, and you’ve got the value added of potentially mitigating cash management goals on buyer and seller side,” Thomas said. “The buyer probably wants to get paid earlier; seller wants to hold onto cash until later. In most cases, you can have an intermediary who can balance those cash management needs when you’re using virtual cards.”
Adding More Guardrails
Although prepaid and virtual cards are powerful additions to payouts, they don’t solve the fragmentation in the AP process on their own. This is why it is important for businesses to consider unified B2B payments platforms.
An all-in-one payment platform eliminates the need for multiple systems and logins. It can also save organizations a significant amount of time currently spent on manual tracking and paper processes.
“One of the benefits of B4B Payments is that our app can capture receipts,” Becher said. “We look at reconciliation, we look at people having to gather receipts, make copies, and send them in. What it amounts to is that there’s a lag to get reimbursed.”
“The great of today’s platforms is that you can prefund an expense card and as a transaction is being done at the point of sale, that individual can take a photocopy of their receipt,” she said. “It can be uploaded and immediately go to accounting, so that on both sides we have accountability.”
This real-time visibility extends across all of an organization’s operations, and a single portal can be used for auditing and reporting.
In many businesses, multiple bank accounts and systems often come with multiple users. Managing access for these users is another pain point—one that can be alleviated by moving to a unified platform.
“Overall, it’s putting more guardrails in there, and those can be as wide or narrow as a business needs,” Becher said. “Also, you can access multiple payout options from one portal. If you wanted to do ACH, prepaid or virtual cards, real-time payments, that is all dependent on your business and what best suits your vendors or customers. That’s key here—everything is accessible from one central point.”
The more of the AP process that is captured in a single system, the less burdensome it becomes for an organization’s accounting staff. The finance office can use this additional time to evaluate operations more effectively and, in turn, make more strategic decisions.
“You’re talking about a bunch of different moving payment instruments,” Thomas said. “If they’re in one platform, you can start getting recommendations, like: you should be thinking about a virtual card here because you could keep 10 extra days payable outstanding on your books, as opposed to just cutting checks on the agreed terms of payment timing or whatever the case might be.’”
The Compliance Straight and Narrow
These added insights into an organization can improve efficiency, but they can also keep a company on the compliance straight and narrow. This is increasingly difficult as businesses wade through Know Your Business and Know Your Customer checks and strive to remain compliant with anti-money laundering regulations.
As organizations search for platforms that can unify their AP process, they must ensure they select a partner that adheres to the most current regulatory standards across different regions. Once they have a platform in place that keeps their transactions compliant and secure, they can begin focusing on what matters most.
“It is extremely important for businesses to be able to have all the data available to them,” Becher said. “They see trends, are able to better manage their cashflow and strengthen their business partnerships.”
