5 Key Implications of Digital Transformation on B2B Payments

The idea of ‘Digital Transformation’ was first introduced in 2014, but while its benefits have been well-illustrated since then, its uptake has been hampered by a hesitancy to commit to adopting digital technologies. Now, the Covid-19 pandemic has seen those once reluctant embrace Digital Transformation, not least digital B2B payment processing. But what implications is this evolution set to have?

Digital Transformation has not come out of thin air, of course. For most consumers, everyday payments for purchases are carried out with a tap of their bank card and no longer in cash. Meanwhile, online banking has become popular with account transfers and bill payments all being done via the internet.

And yet, almost half of all businesses in the UK continue to use paper cheques and paper invoices in their B2B payments processes. The 2019 report revealed that 49% of 500 companies had not yet made the switch, and while this is a significant fall from 63% of businesses in 2018, it still is remarkably high for such a technologically literate time.

The future of finance is inextricably linked with technology, with an Accenture Strategy report revealing that 48% of senior finance executives accepting that digital technologies will fundamentally change everything that finance does.

AP automation has been, and will continue to be, a key part of that fundamental change. Paper-based B2B payment systems are slower, more labour intensive and more prone to human error than the processes offered through digital transformation.

In fact, research has shown that an automated AP system can reduce time spent on processing payments by as much as 80%, reduce processing costs dramatically, provide greater transparency, and provide greater security via the Cloud when compared to traditional manual processes.

5 Key Implications of Digital Transformation on B2B Payments

1. Increased Productivity

   According to the IOFM’s 2016 AP Key Performance Indicators Study, the average AP department manually handles 61% of the invoices it receives. When the volume of invoices is high, this percentage places the AP department under extreme pressure. Digital technologies automate the individual invoice processing steps, drastically improving productivity. In fact, 36% of businesses that have adopted digital technologies have recorded higher productivity, while AP automation has resulted in 3.9 times as many invoices being processed and 63% more invoices being posted without intervention.

2. Better Invoice Tracking

   According to a survey by Aberdeen Group, 46% of best-in-class organizations use digital technologies as part of their invoice receipt and workflow processes. Digital technologies make their AP systems more efficient, helping them attain that best-of-class status. They can track every invoice with Key Performance Indicator (KPI) dashboards that provide users with the readily available data needed to perform daily tasks, monitor performances, and spot problems or opportunities as soon as they arise. In essence, it provides a complete audit trail of every point within the process.

3. Boosts Early-Payment Discount Captures

   For an organisation that processes hundreds of invoices each month, early-payment discounts can translate to significant savings. Yet, most businesses manage to capture less than 21% of all early-payment discount offers. Accounts payable departments that use digital technologies successfully capture those discounts. The average time required to process an invoice manually is 8.8 days, but they are able to process invoices in less than half that time (3.7 days), and less than a third of the time compared to the slowest processing periods (14.3 days).

4. Enhanced Visibility  

   With poor procedural visibility, AP specialists cannot confidently prioritize tasks, managers don’t get the full performance picture, and financial insight is less clear. Real-time data is a key concern for AP departments who need to find the relevant information as close to immediately as possible to ensure informed decision-making.

   But with digital technologies, an organisation can get real-time access to the critical KPIs and operational data. According to Aberdeen Group, 68% of best-in-class organizations surveyed by Aberdeen Group employ an automated solution that provides real-time visibility and control into all cash account balances.

5. Reducing Manual Tasks

   Traditional manual invoice processing is labour-intensive and not particularly efficient. The manual tasks are also mundane and repetitive, which creates a further problem – the risk of human error. In fact, in one survey of businesses that process over 350,000 invoices annually, invoice errors are estimated to led to 32% of late payments and 36% of calls from suppliers, while 3.6% of invoices entered manually include a data entry error.

   Delays are also common, with 37% of accounts payable staff up to 8 hours resolving AP process issues. Some 63% of the surveyed businesses has received duplicated invoices, while 58% paid late payment charges to suppliers.

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