It's been said that a mind stretched by a new idea can't return to its original dimensions.

You can source that to Oliver Wendell Holmes or Ralph Waldo Emerson, depending on your search results, but the notion stands nonetheless. In the accounts payable automation arena, it's especially true and our brief today is primarily aimed at helping you understand the accounts payable metrics that you can measure and manage in ways that perhaps you previously couldn't. We've routinely heard time and time again from the various finance leaders we're consulting with that in manual accounts payable environments, they have little to no visibility or control over a given process.  At best it's limited visibility, which leads to suspect decision making and often times creates negative consequences to the business.

Here are some pivotal cases featuring accounts payable metrics you need to have visibility into:

a). Approval processes: when it comes to invoice approval processes, not having invoices in an automated electronic workflow means zero insight into where the process is at and who has responsibility over a particular transaction or set of transactions.  This could mean bottlenecking to a process if an approver must authorize a transaction and / or assign a GL code to it.

b). Payment dates: if you don't have a timeline for paying bills that is clearly visible and articulated in such a way that you can prioritize payment based upon due dates, you could easily be setting up to pay your vendors late and in so doing incur late payment fees that are both unnecessary and unprofitable.

c). Invoice status: if you're not assigning a status to your invoices, regardless of whatever stage they are at with respect to how you currently process them, it means that you can't explicitly identify exactly where they are at in the process.  This stinks, especially if you're having to manage vendor relationships and they call into you turning the heat up on you to provide them needed payment details.

These are just a few examples of some of the pains that literally thousands of businesses just live with despite the fact that there are automation technologies that can lift them above the mire that is manual accounts payable.

So what are some accounts payable metrics that you should be tracking but probably aren't?

It's a good thing you asked that and we want to devote the rest of this piece to addressing that to shed some light.  For starters, we want to start on things that have immediate tie-backs to efficiency and translate to fiscal impacts.

Insightful accounts payable metrics that will deliver immediate value to you:

Another of the accounts payable metrics that’s foundational is invoice processing in days as you can quickly see how efficient or not you are at cranking through your invoices from presentment to posting.  This also has obvious implications when evaluating individual processor productivity and can lead to establishing new standards for what’s possible per full time employee via accounts payable automation!

2.  Accounting Staff Productivity - This may be something that is more relevant in larger AP departments, but nonetheless if you have a staff larger than one it may be helpful for you to understand who is processing what set of invoices and how efficient they are at their job.  Additionally, tying into point #1 above, you can start to overlay the subset of invoices that they are responsible for as a consideration for their actual workload and as such, gain insight into why they may excel or lag behind in terms of efficiency. Essentially, you can use benchmarking and reporting within a robust accounts payable automation platform to give you the data you need to better manage your own staff.

3.  Discount Capture -  One of the easiest ways to flip AP into a profit center is through the capture of early payment discounts.  Far too many businesses do little or nothing in terms of pursuing these opportunities. For some it's a lack of awareness or tenacity to pursue them...for others it's lack of visibility into what's available and for others it's a lack of execution.  Jumbled systems and no insight into what's on the horizon for early payment discount opportunities means chances squandered. By managing a dynamic process against a dashboard interface factoring real time data, you can quickly assess what a legit opportunity to pay less and thus create dynamic savings for your business looks like.  Once identified it can be executed on and the max value for AP can be achieved. It doesn't take a ton of capture from a percentage of relative spend basis to offset the cost of an empire AP team, and we've seen these types of numbers scale substantially depending on the size of the business, making this an absolute gold mine of an opportunity.

4.  Approver Efficiency - Accounts Payable staff is by no means the only subset of people in an organization that can aid or impede the efficiency of a process.  For Non-PO based invoices approvers have their part to play. By getting insight into your stack of approvers and how quickly they are turning invoices in the system you can make strides to squash bottlenecks before they arise.  Advanced accounts payable automation systems will allow you to put hedges in place over a process by way of automated delegation in the event someone is sick or on leave so that invoices can flow to another approver for payment authorization.  Additionally you can use time-based escalation protocols to level invoices up to get to a decision maker that can take action before you lose discount opportunites or get jacked by late fees.

5.  Exception Rates - Again in line with understanding the core of a matter, getting to know how invoices are flowing through your process is key and more importantly understanding what types of invoices are kicking out as exception to the process is paramount.  This can help you isolate where the root of the problem is...for instances, if you keep getting line item and pricing mismatches on PO based invoices, it could mean you've got a sloppy procurement person on staff who needs to get their act together so the good of the team is promoted or it could mean you need to reach out to your vendors so you can get on page in terms of pricing or whatever the issue is.  Bottomline is when you can see what the exception rates are especially by type of invoice your processing or by vendor you can do a deeper dive and enhance the process on a go forward basis.

Getting this kind of clarity into your accounts payable process via the visual manipulation of accounts payable metrics is massive, especially when looking to prove out business case justification for the gains of AP automation!

6.  Straight-through processing - One of the hallmark accounts payable metrics to get excited about...essentially it represents the subset of invoices that move through your payables environment with zero manual touches.  For anyone who is a manager of the ap process, this is one of the most common desires that we've heard expressed...less manual intervention, less keystrokes, more time saving. Well, the goal of accounts payable automation is obviously to move as many transactions into the sphere of automated invoice processing where the automation technology is driving invoices along their respective tracks and in many cases it's possible to push a large subset through when you have solid validation techniques in place and 2 or 3 way matching executing and validating itself.  If everything is netting together from either an invoice and PO document (or with a receiver on top of it), why would it need manual intervention. The higher you can crank this subset of invoices percentagewise the happier you'll be. It means you'll be getting more for your investment into automation and this becomes the real juice to transforming the front end of invoice processing.

7.  Percentage of suppliers accepting electronic payments - An additional insight that is crucial is tracking the number of vendors that are accepting electronic payments.  Why? For starters ePayments cost far less (check this post out on that front).  But also, integrated payables, and specifically virtual credit card payments represents one of the primary ways you can monetize your payment stream and literally flip AP into a sustainable and sizable profit center.  If you're not actively pursuing integrated payables you are behind the curve and suffering for it. This represents the lowest hanging fruit in terms of making smart and low risk decisions for improving AP and can be done before or after automation AP invoice processing.

8.  Percentage of invoices tied to a purchase order - This may not matter much to you but if it doesn't, it could.  It all depends on how you enact controls and what your comfort level is with getting requisitioning authorization front end in the process.  If that's something you want up front then this is a metric you're going to care about. Essentially you'll be tracking the flow of invoices in your businesses that have originated from such a process and thereby be harnessing this subset of accounts payable metrics to effectively gauge your level of control over your purchasing process.

Accounts payable metrics like PO vs No PO tracking is pivotal for gaining insight into the degree to which you have solid controls in place over your process to curb unauthorized spend or the potential for fraud.

9.  Accrual Reporting - If you're going through a month end machination by calling out to various department heads or approvers to get a lay of the land in terms of the invoices that they may be sitting on or know will be coming in you are living in the dark ages.  When you have all invoices converted to data upon immediate receipt into your process you've got the data at your fingertips and that entire effort of inquiry can be shoved off a cliff and with a higher degree of accuracy than what you may previously have known.  This is a massive win for any AP manager or controller who is doing this at each month end.

Conclusion

There’s really not a limit to the number of key performance indicators or accounts payable metrics that you can track when you have a digitized, automated process in place that gives you rich and dynamic reporting capabilities you can really unearth the gems that will help you attain better business outcomes.  From advancing tighter controls over the process, to driving internal accountability, to reducing cycle times, to monetizing your process and enhancing its strategic value the possibilities afforded through tapping into accounts payable metrics are limitless. We invite you to continue your learning by checking out the ebook below on the four keys to maximizing the value of accounts payable.

The busiest time of the year

For many companies, the fourth quarter represents some of the most challenging times of the fiscal year.  Besides an often frenetic push to hit revenue targets, frequently driven by end of year promotions and holiday initiatives, you have a glut of planning activites that are layered on top of already busy staff.  Couple this with the financial reporting responsibilities of year end activities and you've got the perfect storm....of fun stuff.....riiiight. Having worked with finance executives, managers, and staff for years, we get it. There are many things you can doing in the financial back office that is accounts payable, but there are times when you have to lift your gaze beyond the pale to consider other, better options for the way things get done.  With respect to b2b payments, we believe there's a mighty strong case for partnering with an organization focused on streamlining this nuanced area.

B2B payments represents a shifting area that is demanding and multi-faceted for virtually every business that is trying to keep pace with the rapidly changing payments arena.  As we've discussed previously, there are already a plethora of things to consider when looking into b2b payments strategy, we’re going to describe below but the key take-away from this post is that you need not go it alone.  It's been said that experience alone is a tough taskmaster, and that there's wisdom in walking in the steps others have taken. In other words, you can bypass some of the mistakes and setbacks others have faced in the business to business payments arena by gleaning wisdom from those who've gone before.  As the good book says, "by wise counsel is a successful war waged".

So as we explore business to business payments a bit in the ensuing paragraphs, we want to make the case for the wisdom in gleaning counsel from where others have walked.  If it helps you in the process of evaluating your current payments landscape, and reflect and think on the art of the possible as it pertains to transforming AP payments.then we've done our job.  

With that said, here are the 7 Reasons You Should Consider Partnering With A B2B Payments Partner:

1.  Your people are busy. 

If you've not already automated front end invoice processing, then you're extraordinarily busy with invoice entry, validation, 2 or 3 way  matching and the like. We've got a ton to say about gaining leverage over the process and making it as effortless as possible, and you can check that out over here.  

However, if that is the situation you're stuck in right now, optimizing business to business payments is not probably top of the fold for you because you're probably behind the eight ball from a workload perspective already.  Ancillary things like shifting the payment type to a more strategically valuable one is something that is done with a high degree of intentionality and if you're people and your process are barely keeping you above water, then what are the odds you're getting to high value accounts payable priorities, when the basic ones are bogging you down.

The point here is with the right b2b payments partner, you gain the personnel leverage that they have to offer, specifically in areas like vendor outreach and onboarding.  A major consideration for virtual card payments, which is a subset any solid b2b payments partner is going to have serious command of, is that said partners can quickly assess which companies are likely to accept card payment technologies based upon established card networks and databases of previous spend data.  

With this said, you can quickly get on the road with virtual card payments, reap their rewards, and identify the vendor base that will require additional outreach.  Done correctly, this outreach effort can be offloaded to the right payments partner and they can lever the time value of money to gain mindshare and card acceptance amongst your vendors.

According to research from Deloitte Consulting, the global payments market is estimated to hit $23.1 Trillion dollars by 2020.

2. The payments landscape is shifting.

While we don't know everything in this space, we know that's a lot of zeros.  We also see in the data from Deloitte that payment trends are shifting, as ACH is set to displace check consumption by 2020 as well.  

The other thing we're keenly aware of is that there are myriad payment types that are available for use: cash, checks, wires, ACH / EFT, virtual cards, cryptocurrency, and the list goes on.  This is difficult to keep up with on your own, let alone the things that technology portends in the future. Business to business payments partners have deep command of the space, and the vision and ability to adjust to the disruptive changes of the digital age we're in and accelerating through.

3. Middle market businesses are underserved in this area.

Specifically, we're talking about companies  in the $50MM-$1BB range. Again, according to Deloitte, this segment of the economy represents a $6.6 Trillion dollar chunk of the US economy and one that is growing rapidly.  Deloitte bandied about the words "tectonic shifts" to the payments landscape for this segment of companies and we believe this largely has to do with the lack of resources and variegated b2b payments landscape.  

As such, there are many business to business payments partners that are geared up to serve this market, which should facilitate some positive outcomes for both parties.  The upside to this is that by switching to modern electronic b2b payments, you can minimize the costs associated with traditional payment means and pave the way for sustainable cash rebates in to the business via virtual credit card payments, thereby flipping accounts payable from a cost center into a profit center.  We touch on this over here (is there supposed to be a link?), as one of the key pillars to maximizing the potential value of the AP process.

4.  Payments fraud is on the rise.  

Not surprisingly with the proliferation of b2b payments and the various electronic mediums they encompass, hackers are growing more brazen and sophisticated in their schemes to defraud payers.  A shocking stat from the Association For Financial Professionals 2018 AFP Payments Fraud and Control Survey report where they assessed 682 different companies, nearly 78% had reported an incident or attempted incident of fraud in 2017.  

This is staggering and one of the conclusions of the article is essentially that the average company is woefully ill-equipped to prevent these types of events from happening left to their own devices.  As such, by joining with a b2b payments partner, you can harness the strengths, protocols, and security measures by solid fintech institutions that proactively engage countermeasures against fraud incidents.  

Things like positive pay, duplicate payment detection, hierarchical automated approval workflows with division of duties, and two-factor authentication for payments are all building blocks for creating a dependable and secure payments infrastructure.  Further data from the same report suggests that the impacts to the bottomline are not nominal, but represent a full .5% of top line revenue in negative impacts from fraud incidents.

5. Business to business payments partners have tools to facilitate your vendors' payment reconciliation processes.  

This is a bit more of an outlier to the overall conversation, but there are tools in the market that can make reconciling and ingesting whatever payment stream they're taking in much easier.  For instance with regards, to virtual card payments, where your vendor's accounts receivable team will have to pull in and reconcile card funds, there are tools from third party provider that afford high levels of robotic process automation to expedite payment processing and minimize human involvement.  This can't be overlooked because it eliminate a critical barrier to adoption for this payment rail.

6. Costs are a consideration.

As we've touched on in previous content briefs we've posted, there's a broad range for payment processing costs.  The point here is that by partnering with an epayments focused b2b payments partner, you'll be on track to converting a high percentage of your payments to those most financially beneficial to you.

Here's a quick perspective on b2b payment types and costs:

• Old school methods like wires are the most obvious suspects when evaluating payments from a cost perspective with nearly an $11 average wire cost coming in at the top of the scale.
• Checks do a bit better and come in just under half of that figure at around $5.14 to process per transaction according to The Accounts Payable Network, still not an insignificant amount and they lack the immediacy and finality associated with wires.  However, as it stands right now they are the dominant type of payment in the market though as stated above it seems this is ripe for displacement by the end of the decade.

• ACH / EFT is the lowest cost alternative to the first two mentioned in this section averaging about $.50 per transaction.  Considering they are much faster to settle than a check and bypass the time and cost associated with postage and mail processing they've grown tremendously in the past few years.  However, other than being a reliable vehicle for paying, there is not much other fiscal incentive besides cost reduction associated with their utilization.

• Virtual card payments incur no costs to the payer, but as with traditional credit cards the merchant accepting the card is assessed a merchant fee for utilizing the payment rail and network that is sending the payment.  These fees can vary but generally fall within a 2-4% range depending on the network and the most common for B2B payments are Visa, Mastercard, and American Express.

Another cost consideration for merchants accepting this payment type is the amount of interchange that is deducted from the transaction.  In other words, some vendors have advantages in this area via lower interchange rates through various pre-established processing rates due to their agreements they have in place with the various card networks.  Regardless of the interchange, the virtual card represents the best option for many accounts payable departments to monetize their payments stream in a sustainable manner, and one which is only growing in the market and offers high security standards and numerous business advantages.

7. Managing supplier data is easier with a partner.  

This can be down to each company's individual payments process, but it certainly helps when you have a standard operating procedure that is repeatable and optimal when it's automated.  Most solid b2b payments partners have robust technology stacks that will set, retain, and automate payments to vendors factoring their preferences on your behalf so that payment execution is streamlined and optimized for your business where possible.

Conclusion

If you haven't taken the time to really establish a solid b2b payments strategy, it's a crucial thing to do as it will certainly influence whether you have need of a b2b payments partner as we've looked at in this brief.  If you're wondering about you can improve, we encourage you to check out the eBook below that talks about four keys of maximizing the value of accounts payable...it'll help you on your journey.

Winding down Q3

As we throttle through what remains of summer, most accounting and finance leaders are dealing with the typical challenges of the corporate landscape during the the transition to the fall. We get it, time to wipe off the sunscreen, put away the beach chairs, and buckle down behind the laptop for some marathon sessions as Q4 and end of year planning exercises ramp up. It’s a good time to take stock of where you’re at presently, and begin the planning process for where you want to go as it pertains to B2B payment processing strategy. This article should help you have clarity about the things that must be a priority for your business as you explore B2B payment solutions for the upcoming year and give you a winning edge.

For certain, there’s never been a more complex time to assess all the goings on in the B2B payment processing arena. There are more ways to pay your vendors than you can shake a stick at, and though there are many options, not all are great and certainly not equal. As such, it’s the goal of this article to get you thinking about your options as you move forward this year so you can make solid decisions for your business..

Currently in the market you’ve got the following b2b payment types:

• Paper check
• ACH (Automated Clearing House)
• Electronic Wire Transfer / EFT
• Commercial Card
• Virtual Payments

Paper Check

Checks have been in use for nearly 300 years, making it far and away the oldest item on this hit list, and while the fundamental points of the check haven’t really changed, some innovations along the way have modernized it to include, banking numbers for accounts, institutions, and the facilitation of MICR (magnetic ink verification recognition) technology along the bottom border.

ACH

Also known as automated clearing house, ACH is an electronic network for financial transactions in the United States that’s been around since 1974 and is governed by NACHA and US Federal reserve. It’s modernized how businesses conduct payments amongst themselves and has contributed to faster b2b payment cycles at a lower cost than checks.

Electronic Wire Transfer

Launched by Western Union in 1872 on its telegraph network, it's known for being reliable and is undergirded by SWIFT or Fedwire systems that have unparalleled immediacy and finality to the payment execution. This does come at a premium in terms of costs as we’ll see in a moment.

Commercial Cards

Commercial card refers to traditional corporate credit cards or purchasing cards. These are physical credit cards that empower business to transact and pay via existing credit networks from the likes of Mastercard, Visa, or American Express. They offer varying degrees of controls, flexibility, credit thresholds, and to an extent create float periods that are advantageous to payers. From the payee perspective, the drawbacks center on the merchant fees levied by the card network for processing the transaction and the intake portion from a processing standpoint.

Virtual Payments

Virtual payments are a newer outcropping in b2b payment types, but one of the most lucrative for payers. Essentially they create a single use credit card transaction that can fund the payment of one or multiple invoices. The upside here is that the payer harnesses the payment stream in order to tap into the interchange pool that enables them to create a stream of cash rebates into the business. Additional feature sets that are compelling are the visibility and controls latent in this payment type.

What are the nine things you need to know when you begin planning your B2B payment processing strategy?

1. Payment fees vary massively by b2b payment types.

As such, if you’re not quantifying what it takes and how much it costs to physically conduct payment, you’re not aware of how much that is helping or hurting your business.

• According to The Accounts Payable Network, the average cost to process (authorize, print, and mail) is $5.14.
• The average cost to process an ACH transaction per the Association of Financial Professionals is $.56 (between internal and external costs).
• The average cost to process and EFT / wire payment is $14.42 again per the same AFP report.
• The average cost to process a credit card transaction is nil from an internal (payer) standpoint but anywhere from 2-3.5% of the transaction which is incurred by the payee.
• The same as the point above goes for virtual payments though,this generates a rebate stream back into the payer’s business anywhere from .5-1.25% of the eligible credit spend.

2. Check payments, though not inexpensive, are slow, and still make up the majority of b2b payment types in the US when considered categorically.

The reason for this really has to do with a few things we’ll look at in the following point, but primarily is centered around resistance to change and lack of any kind of mandate forcing change.

3. While it’s widely known that optimal b2b payment processing strategy centers on electronic payments, it’s ironic that many times there are numerous things that serve as roadblocks to actually adopting more efficient and beneficial b2b payment types.

Things as basic as corporate culture can effectively hit the brakes on initiatives that would otherwise create value and drive the organization forward. For others, legacy systems, such as AS400’s, can create all sorts of issues with manipulating and integrating data. This lack of flexibility can stymie the best intentions in terms of modernizing b2b payment processing for many businesses. Further, lack of clarity on security protocols or needs can also retard advancements made in this area.

4. Smart finance and accounting leaders recognize the time value of money.

When it comes to AP invoice processing, certain elements are fairly straight forward. Pay the bill on time and you don’t incur late payment charges that penalize you for missing your payment terms. Pay your bill early, and you can typically reduce the bill by some pre-negotiated or dynamic discount, typically in the 1-3% range.

However, for those who understand the implication of capturing early payment discounts, you’ll quickly grasp that the annualized return rate of netting a 2% discount dynamically or within a ten day payment cycles is the equivalent of bagging over a 36% investment yield. Not too shabby, and there’s a detailed breakdown of how that works right here!

5.The importance of visibility in B2B payment processing can’t be over-stressed.

This should be common sense for any kind of accounting manager, controller, or CFO, but having access to the pertinent payment details of a particular transaction is crucial. One of the key advantages to ePayments over traditional check payments is the latency factor. n other words, electronic payments methods provide better insight into the status of payments throughout their delivery and execution.

When sending check payments,for instance, there is a longer period of time for the receipt, processing, and settlement functions, which has some negative consequences from an insight perspective, but does have the benefit of check float, which matters more to some finance leaders than others.

However, things like ACH, virtual credit cards, and wire provide rich payment data and empower both payer and payee with a broader and timelier data set. Depending on what your perspective is, this is a value added area that is worth noting. The byproduct of enhanced insight into B2B payments is heightened cash management strategy and tighter alignment to treasury functions.In other words, an elevation of value for accounts payable from just data crunchers to key stakeholders in the process.

6. Get control over payment errors.

B2B payment processing whether in a fully, semi, or non-automated environment is going to have its fair share of transactions that contain some level of error. The fact is that the higher the volume of your transactions, the greater that number of errors will be, and from our perspective an ounce of prevention is worth a pound of cure.

B2B payment errors can range from anything as broad as a duplicate payment to incorrect amounts, incorrect vendor selection, to incorrect payment methodology (or one outside a vendor’s preference or agreed upon method), to a variety of others. Harnessing automation and business intelligence tools can help you quickly reduce your error rate, regardless of what it is. Things like duplicate payment detection can prevent redundant payments along with other areas like default payment instructions and much more. If you’re not actively pursuing improvements in this area you’re missing the boat and can set yourself up as Walter Sobchak so eloquently put it that, “...you’re entering a world of pain.”

7. Why virtual cards are pro.

We consider virtual credit cards to be the apex predator of the B2B payment solutions that are in the market. They boast extremely high security standards due to their nature of being temporarily active and that for single use. This level of security means that fraud instances on virtual payments usage is extremely unlikely.

Additionally, because payment data is transferring electronically, it can be disseminated dynamically and to both parties (payer and payee) and at a nominal cost. Obviously merchant fees are levied on the accepting organization, but in most cases it’s a cost of doing business and a means by which customer payments are facilitated.

Granted, reconciling the payments for the payee can be a trick but there are services in place now to accommodate and automate exactly that. The rebate stream generated is the real kicker here. When prior to virtual payments have corporate payments ever been able to be monetized other than in a dynamic discounting scenario?

8. Turns out companies are into reducing costs...go figure.

Here’s the bottomline on average payment costs by type:

Check - $5.14 to process, cut, and mail a check

ACH - $.50 per ACH payment factoring internal and external charges

Wire - $11-$15 per wire, yowza!

Virtual payments - Gratis, with the exception of the merchant fee passed on to the payee, anywhere from 2-3.5/4%, so touchdown for the payer!

If you’re lumping all your processing into checks and wire, that’s costly, painful and something you can obviate upstream through a better B2B payment processing strategy.

9. When it comes to B2B payment solutions, there’s a ton of different ways you can go, but not all ways are equal.

You certainly could cobble together relationships across the spectrum of payments, but how many people want to manage multiple relationships for different payment mediums…?

We think it’s better to identify a B2B payment solutions provider that can meaningfully address all of your payment needs across all payment methods. So that would mean one that could help you automate virtual credit card, check, ACH, and wire payments.

Additionally, another layer of value would be one that assists you with strategic functions like vendor outreach and payments solicitation. In other words, one that reaches out on your behalf to your vendors by levering a pending payment as a fulcrum to drive adoption to preferential payment methods. (FYI this is exactly something we do to drive virtual payment adoption rates higher so you get to taste and see that this payment stream is good).

Additionally, if it’s strictly down to payment delivery vehicles and you’re not trying to go upstream with payments by way of capturing dynamic discounts, you’re missing out even further. A solid B2B payments partner is going to have tools for you to enable you to create dynamic discount offers to your entire supplier base, whether or not you have pre-negotiated and established payment terms with your vendors. As such, if you’re not getting this out of our payments partner, you’re getting short-changed (sorry, but it’s the truth).

Conclusion

Hopefully this has shed some light on the b2b payment solutions landscape for you that will help guide b2b payment processing strategy as we get set to close out this calendar year. We have a treasure trove of great insights and content available here for you to continue to explore things like accounts payable automation and we’re always an email away, so reach out if you’re looking for answers!