This ominous headline is part of a posting that appears in The Fintech Times where the author references a recent payments fintech survey of US and UK SMB business decision-makers about financial process automation. We have been advising members of the criticality in automating end-to-end payments, for which the pandemic has provided a five-alarm fire-level warning to businesses to get moving or else.
While that may be a bit dramatic, somewhere in the piece the old inertia issue pops up again, basically restating the lingering traditional business attitude that manual processes work so are not really a problem, until they are.
‘The last year has been tough for most UK businesses. And now more than ever, companies are streamlining operations and processes to reduce costs and improve workforce management. One key factor preventing the growth and survival of B2B firms is late payments as a result of outdated Accounts Receivables (AR) processes….According to BlueSnap’s recent payments report which surveyed 800 executives, more than 80% of UK executives say the future of their company is threatened by overdue invoices. Yet, whilst the technology is there for B2B businesses to use, modernisation isn’t translating into reality for many. Of those surveyed, 100% said that at least part of their organisation’s AR process remains manual….Reliance on manual AR processes is a significant threat to efficiency, with 31% of businesses continuing to fax paperwork and 39% posting invoices. Meanwhile, 11% of businesses surveyed said they are still accepting payments in cash and 9% continue to take paper cheques….For businesses to remain agile as we come out of lockdown, it is imperative that they modernise their outdated AR processes.’
So while this particular posting focuses on receivables, that being a key set of processes affecting DSO and cash flow, the broader issue in play is really that a failure to modernize cash cycle systems and processes across the board will eventually leave businesses in dire straits versus competitors. This effect shows up in several key areas, include hard costs associated with manual rework, ineffective working capital controls, and the insidious opportunity cost of failing to digitize and use data, given the rapid advancement of technology such as AI.
We are a bit surprised that so many businesses are still lacking the motivation to automate, but that may be a side effect of the survey timing (late 2020) when many businesses were still knee-deep in survival tactics, so perhaps already 8 months later the message is finally getting out to laggards.
‘UK businesses need to close the gap with B2C payments, where innovation is the norm. When combined with automation, upgrading payment processors can improve a B2B firm’s accounts receivable management, reduce costs, and boost efficiency….AR solutions have begun to leverage comprehensive payment processors to provide full payment services to customers making invoice payments. This means that customers can now open an automated email, click one button to view the invoice, and then pay it off with a variety of payment methods. They can even set up automatic payment processing rules to ensure invoices are never overdue….Ultimately, in order to succeed in today’s market, B2B businesses must modernise their payment solutions to suit the needs of their company, employees, and consumers. Failure to adopt new payment and Accounts Receivable (AR) technologies will hamper business growth on a massive scale, and these firms run the risk of being left behind in the movement towards automation.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group