The latest B2B Payments Automation Innovation Playbook, a collaboration between PYMNTS and Mastercard, found that most businesses surveyed have not yet implemented any kind of AP automation — yet 85 percent say they want it. Despite their retention of paper checks, businesses want accounts payable (AP) automation.
In B2B payments, there appears to be a missing link, resulting in inertia that prevents organizations who want payment automation from actually implementing it.
There are a few reasons for that disconnect. Vendor acceptance is a big factor, as is the perceived challenge of upgrading back-office IT and infrastructure to be able to support AP automation.
But the biggest challenge might be stemming from the fact that there is widespread misconception about what AP automation actually means.
- AP automation is the automation of the receipt of the invoice and the workflow to approval, meaning a supplier sends an invoice to the buyer, who goes to procurement and makes sure the invoice is approved for payment.
- Integrated payables is, once that invoice has been approved, actually making the payment though multiple payment options, be it ACH, check or wire.
In other words, AP automation doesn’t necessarily entail the actual payment of invoices. Unfortunately, enterprises will often invest in an AP automation solution on the misconception that it means their payables will also be automated and digitized, leading to buyer’s remorse.
Another major misconception in the space is what it means for payables to be integrated into an enterprise resource planning (ERP) system. Often, service providers will advertise their solutions as being able to integrate with various ERPs. However, at closer glance, that integration means their solution is able to extract data from the ERP and integrate it into their platform to facilitate payment of invoices.
The on-boarding process can introduce more pain for an organization already struggling with manual accounts payable processes. In some cases, the file mapping process that must occur for that ERP “integration” can take weeks or months, and by the time a company is on-boarded, the C-suite loses interest in the AP automation transformation journey.
This is part of the IT challenge of accounts payable and ePayables automation process: An organization may be ready to ditch paper, but the on-boarding and integration friction can make the journey more painful than a company’s current way of operating.
If, in the end, an AP automation does not have the functionality — i.e. the integrated payables capability — that an organization thought it would have, then that pain was felt for nothing.
Increasing awareness among organizations about these misconceptions in AP automation is central to the payments industry. Once they’re cleared up, a company can more strategically and efficiently integrate payables automation within their existing back-office platforms and processes, and make more informed decisions about what they need in terms of invoice, payment and reconciliation automation technology.
But the journey isn’t complete once those decisions are made.
Within the B2B payables evolution, there is growing importance of collaborating with vendors to ensure that the correct payment technologies are being used. Such was the motivation behind Priority’s collaboration with Billtrust.
Vendor collaboration isn’t only about deciding whether to aid in the virtual card acceptance process for vendors, or to choose ACH over checks. It’s also about managing the unique buyer-supplier contracts, payment terms, and financing agreements in place so that both ends of the transaction are comfortable with the solutions used.
That collaborative approach will continue to guide the B2B payments space as it evolves in the coming five years. The industry is embracing payment hubs and vendor networks, particularly within verticals like hospitality or health care that operate with a core group of leading suppliers in their perspective industries. Taking a network approach to ePayables automation will unlock siloes and promote seamless payments.
The emerging state will feature touchless processes between accounts payable and accounts receivable. There will be a convergence of the two. Everybody has been so focused on the AP side, and on buyers’ preferences, and less focused on AR and how to make it easier for accounts receivable to accept payments.”