This posting in CPA Practice Advisor covers some points about which Mercator Advisory Group has been advising our members for some time; that is, there are more and better cash cycle solutions than ever before, so what are you waiting for? The onset of the pandemic has been a wake-up call for many companies who suffer from inertia around modernizing financial operations.
The posting author is the CEO of a payments automation company, Nvoicepay, which was acquired by Fleetcor in 2019. We have also been expecting an acceleration of digital payments (in effect, a massive shift from paper checks, etc), which we started to see happen more substantially last year. Based on many discussions since March, supplier interest in getting paid faster has become a critical need, for obvious reasons, so this digital shift to accept e-payments (virtual cards, for example) is happening.
‘Business payments are far more complex, and we’re still not at mass adoption, but the market is picking up steam. There are now several strong suppliers in the market, and investment continues to flow into B2B payments tech. As a result, the move off of check payments is accelerating. According to the 2019 AFP JP Morgan Electronic Payments Survey Report, organizations on average make 42 percent of their supplier payments by check, down from 50 percent in the prior year. This is the biggest drop we’ve seen in several years.’
The author goes on to make some important points about automating financial processes, which includes efficiencies associated with reducing the amount of errors, a huge drain on resources in many payables departments. A recent increase in ACH fraud activity (as evidenced in the recent AFP fraud survey) calls for better controls, which can be packaged into vendor solutions.
There is also the work-at-home issue, which reinforces automation benefits. We might also add the overall benefit from digitalization in terms of data, which allows for greater use of machine learning to further improve transaction processing.
‘Now we’re heading into a severe global economic downturn. Businesses are pivoting to reducing costs, and checks cost a lot—around ten times more than electronic payments. So, in the near term, reducing costs is going to become a driver that accelerates payment automation adoption…I think this driver will remain over the long term as well, and could very well change our payment behaviors forever. Short term imperatives will drive greater adoption, but as more organizations get a taste of automated payments, it will change the way they think about payments. They will realize there is a far better way to pay than writing checks, and I can’t see anyone who’s adopted payment automation going back to the old way.’
The article makes additional points and recommendations so readers should take a few minutes and have a look.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
