Despite the proliferation of technological advancements impacting enterprise environments, some processes have yet to be met with innovations. This is surprising in industries where improvements are being made everyday in regard to products, services and procedures. So, while sales teams, marketing associates and C-level executives get to make use of new tools and technology, retailers – whether brick-and-mortar or ecommerce – are often faced with many barriers when it comes to processing B2B payments.
When looking at the challenges facing the B2B payment market, a few different aspects of the processes are holding back the big picture. As it currently stands, a lot of the problems have to do with the time and efficiency.
One glaring issue is the reliance on paper, and this is even affecting revenue. Corporate news source Business 2 Community reported that 6 billion checks were written in 2012, each of those costing the company that wrote them between $4 and $20 each when factoring in the time it takes to write those checks, the postage to send them and the effort of an employee. Organizations could reduce spending by relying on other means of payment.
"Information is steering the B2B payment industry much unlike the consumer world in which data poses a threat to the customer and company."
However, moving to different types of payments just isn't that simple. In the B2B market, there is always a lot of paperwork that stands in the way of simple credit card-based transactions. Pymnts.com reported that Drew Hofler, director of solution marketing for SAP Cloud and Network Solutions, said information is steering the B2B payment industry, much unlike the consumer world in which data poses a threat to the customer and company. Instead, B2B payments depend on paper, which begs the question of whether checks should become objects of the past. They leave a paper trail that helps both sides of the transaction.
"With the very limited information set that is available through electronic payment and ACH, you're not able to get enough information," Hofler explained in a recent podcast, according to the source. "That's what companies really need in order to reconcile, in order to know what to do, in order to have visibility and to forecast things like cashflow. They need that information."
He went on to state that collecting all this information comes at costs to efficiency because at some point, it needs to be shared with other people at specific times and in certain manners. Then, when considering that every company has different strategies, the task becomes more difficult.
Not just paper
In many ways, paper is much more secure than electronic payments, as evidenced by the many reported data breaches throughout 2014. Even if the security concerns associated with the Internet can be solved, there are still a handful of barrier impacting the advancement of B2B payment procedures. John Bruggeman, CEO of Traxpay, addressed three other "major" issues holding back B2B payment innovations, according to a different Pymnts.com article.
First, Bruggeman mentioned regulatory compliance, the source reported. Depending on the geographical location of the two companies involved in the payment process, there can be different rules and regulations that affect the flow of transactions. While it might seem like the onus is on the government to solve the problems, organizations and their leaders need to speak up and let local representatives know that their business is being held back. The construction of new laws could go a long way toward improving B2B transactions.
Next up, according to Bruggeman, is technology. Innovations and changes need to be addressed because the solution to many data problems lie in analytics tools and enterprise resource planning programs as well as purchase-to-pay systems and electronic invoicing. This relates to paper in the sense that information can be recorded and collected even if credit or debit cards are utilized. Essentially, the tools to create a digital paper trail are required.
Lastly, Bruggeman asserted that the current business model of B2B transactions are impacting the rate of change, reported the source. He explained that different supply chains each have their own sets of rules and processes, which directly affects the adoption of an overarching B2B payment strategy. Until every market is on the same page, businesses will request specific requirements.
At the end of the day, B2B payment processes and procedures are not exactly hurting any organizations, but rather the overall strategy surrounding B2B transactions is simply archaic and is in need of a change. Perhaps big data analytics tools will help some companies develop paper trails, and corporate purchasing cards could become more popular, making the transactions themselves easier. The determining factors will come down to security platforms and the willingness to change. In the meantime, paper will still rule B2B payments.