Theoretically, innovation in technology is great, however, if those the technology was designed for are not able to use it due to a lack of understanding, then it becomes redundant. 39% of B2B firms have said that a lack of understanding of the available technology is preventing them from investing more in AR automation and payments technology. It is becoming more and more important for businesses to educate their employees as failure to adopt new payment and Accounts Receivable (AR) technologies will hamper business growth on a massive scale, and these firms run the risk of being left behind in the movement towards automation.
BlueSnap is an all in one payments platform, that looks to innovate convenient ways of completing all things payments related in one place, be it invoicing, checking the marketplace, managing subscriptions, making mobile payments and more.
Nikhita Hyett is Managing Director of BlueSnap Europe. Here she gives her views on failing to automate payments threatens B2B UK businesses, based off of BlueSnap’s latest report:
The last year has been tough for most UK businesses. And now more than ever, companies are streamlining operations and processes to reduce costs and improve workforce management. One key factor preventing the growth and survival of B2B firms is late payments as a result of outdated Accounts Receivables (AR) processes.
According to BlueSnap’s recent payments report which surveyed 800 executives, more than 80% of UK executives say the future of their company is threatened by overdue invoices. Yet, whilst the technology is there for B2B businesses to use, modernisation isn’t translating into reality for many. Of those surveyed, 100% said that at least part of their organisation’s AR process remains manual.
Reliance on manual AR processes is a significant threat to efficiency, with 31% of businesses continuing to fax paperwork and 39% posting invoices. Meanwhile, 11% of businesses surveyed said they are still accepting payments in cash and 9% continue to take paper cheques.
For businesses to remain agile as we come out of lockdown, it is imperative that they modernise their outdated AR processes.
Outdated legacy systems
Typical AR management is a manual and extremely time-consuming job, which often gets passed around to different people, from office managers to comptrollers to CFOs. It is an inefficient process of combing through invoices and checks to determine what’s been paid.
The BlueSnap report found that prior to switching to a digital payments setup with automated invoice and billing software systems in place, businesses waste up to 11 hours on a single invoice.
Many AR departments still ask their customers to physically mail in paper checks, which delays payments and limits your customer base. It creates friction in the payments process as customers with payment methods that a business cannot accept, will not pay their invoice as quickly. Even checks paid promptly can be delayed by mail or human error.
Impact on cash flow
Businesses’ cash flow and recovery efforts following the effects of the covid-19 pandemic are now, more than ever, being affected by their reliance on outdated, legacy, and often manual technology. One of these outdated payment types is of course the humble cheque. Our report shows that 97% of organisations that accept paper cheques in their AR processes were as a direct result, impacted by the pandemic.
With people forced to work from home last year, 31% of businesses were not able to process paper cheque payments. And a further 38% of companies experienced significant delays in processing cheque payments, as a result of the time it took to collect invoices and cheques which had arrived via post.
BlueSnap data shows that more than a quarter of customers exceed their payment terms, resulting in 29% of an organisation’s monthly revenue being tied up in AR at any one time. Manual AR processes directly affect a businesses’ ability to accurately forecast cash flow, therefore hindering strategic planning and growth. It is clear businesses have a clear need to digitalise their payments and Accounts Receivables (AR) processes.
The barriers to automation
Despite all the evidence supporting the automation of payments, there are still barriers preventing mass adoption. The most significant reason for this is education, with 39% of B2B firms saying that a lack of understanding of the available technology is preventing them from investing more in AR automation and payments technology. Other notable barriers include a perceived lack of in-house technical expertise to implement new systems, along with a resistance to change.
For many companies, a lack of automation doesn’t lead to total collapse, and so there’s no urgency to change — until there is. For instance, costs quickly stack up when DSOs (days sales outstanding) rise, resulting in idle invoices impacting the entire company. Sooner or later, past due invoices will begin to pile up or the person managing AR will leave, and the company will scramble for a solution. This process of accounts receivable management is no longer effective or sustainable.
Overcoming the barriers to automation for future success
UK businesses need to close the gap with B2C payments, where innovation is the norm. When combined with automation, upgrading payment processors can improve a B2B firm’s accounts receivable management, reduce costs, and boost efficiency.
AR solutions have begun to leverage comprehensive payment processors to provide full payment services to customers making invoice payments. This means that customers can now open an automated email, click one button to view the invoice, and then pay it off with a variety of payment methods. They can even set up automatic payment processing rules to ensure invoices are never overdue.
Ultimately, in order to succeed in today’s market, B2B businesses must modernise their payment solutions to suit the needs of their company, employees, and consumers. Failure to adopt new payment and Accounts Receivable (AR) technologies will hamper business growth on a massive scale, and these firms run the risk of being left behind in the movement towards automation.