As economic headwinds continue to slow the global economy this year, businesses want to strengthen their cash flow to weather the storms. Accounts receivable play an essential role in maintaining a healthy cash flow, and ensuring you collect receivables on time is key to improving your business’s financial health.
But what can you do to eliminate late payments amidst today’s economic challenges?
On a recent fireside chat, ezyCollect’s team with Nick Cooper, CFO, Jane Evio, Head of Customer Success, and Ricardo Hori, CTO, discussed the latest trends that will change how businesses like yours are getting paid. They also shared upcoming technologies that will help you effectively overcome the hurdle of late payments.
Here are key takeaways from the session
TABLE OF CONTENTS
B2B challenges at a glance
High inflation and rising interest rates are just some of the challenges that B2B organisations face. Methods such as price increases and product diversification can help soften the blow but not without its consequences.
However, one thing remains true for businesses of all sizes – cash is king. Cashflow and working capital are still the lifeblood of any business, and focusing on getting more cash in will help future-proof your business.
Three B2B Payment trends for your business growth
The pandemic has caused businesses to undergo a rapid digital transformation, beginning with the B2C space and extending to B2B. People have become accustomed to the convenience and efficiency of digital payments, leading to adoption of digital payments in B2B.
Here are some of the payment trends we see that can drive innovations in the B2B space.
1. Better cash flow managment for SMEs, supported by digital transformation and embedded finance for AR and AP teams
With the aforementioned economic challenges, many businesses focus on improving their cash flow management – driving the digitisation of accounts receivable and accounts payable processes.
A lot can happen in the order-to-cash process (O2C). And this goes for both of you and your clients.
The inter-departmental flow of the order-to-cash process has driven efforts to streamline it. This means automation to reduce manual entries and save time and costs for suppliers in collecting and processing payments.
From the client’s point of view, selling the stocks they received from you will be their primary focus. Having the technology that will allow them to automate their payments will reduce their risk of defaulting payments, helping ensure their accounts payable stays current and giving them more time to focus on generating more sales instead.
Recognising the relationship between AR and AP will help reduce the risk of late payments.
2. Bringing B2C ideas into B2B payments environment will drive B2B growth in 2023
The pandemic has caused businesses to undergo a rapid digital transformation, beginning with the B2C space and extending to B2B. People have become accustomed to the convenience and efficiency of digital payments, leading to adoption of digital payments in B2B.
Key features & characteristics of a B2C-like payment experience:
- Buy-Now-Pay-Later (BNPL) – Offering instalment payments allow you to get paid even when clients can’t pay you in full.
- One-click purchase – The ability to purchase orders and pay upon checkout or delivery
- eCommerce with automated processes & ERP integration – B2B eCommerce stores are also becoming common – and it’s essential to see that it’s unique due to credit sales. Payment gateways considering credit terms specific to a particular account and allocating those payments back to the accounting system will be crucial in B2B eCommerce.
Strategies to build a superior payment experience (PX)
Frictionless payments are crucial to adopting B2C-like processes to B2B. BigTech companies have been practicing this for years and there are strategies you can do to adapt those best practices in your business.
Three steps to end late B2B payments using the Big Tech approach
Here’s how you can reduce time to payment, save invoicing costs, and boost customer satisfaction.
- Automate financial processes to deliver a better user experience for both your customers and the AR team
Automation can make financial transactions more straightforward and faster. AR teams will be able to process payments more quickly with automatic reconciliations. Automation can also reduce the time and resources needed to complete tasks, resulting in cost savings for the business. Automation can also improve customer satisfaction by providing faster, more accurate services.
- Speed up payment cycles by moving invoicing online
Online invoicing is streamlined and automated, allowing businesses to send invoices quickly and efficiently. Additionally, online invoicing eliminates the need for manual data entry and is more secure than traditional paper invoices, reducing the risk of errors and fraud.
- Offer multiple payment options and the ease of one-click purchasing
Giving customers several payment options, such as credit cards, bank transfers or direct debit payments, gives them more control over how they pay, which can make a big difference in their overall experience. This also creates more opportunities for you to get paid.
Additionally, the ease of one-click purchasing allows customers to complete their purchases quickly and efficiently as their payment details (e.g. credit card details) are saved securely in the system. Completing a purchase with just one click can help create a positive impression of your business and increase the likelihood of repeat purchases.
- Open communication and dispute management
Open communication ensures customers are updated on any payment policy or procedure changes, so they know what to expect when they make a payment. A dispute management system allows customers to quickly and efficiently resolve payment issues. By proactively addressing customer payment concerns, businesses can ensure that customers feel their payment experience is smooth and satisfactory.
- Automate payment allocation
It allows customers to set up payments automatically allocated to specific purchase orders or invoices without having to log in manually and make payments each time. Automated payment allocation can save customers time and effort and eliminate the risk of missing payments.
In conclusion, we’re seeing that the B2C digital payment experience makes it easier for clients to pay and creates opportunities to increase sales and improve client retention of businesses.
3. The focus on fraud protection will also increase this year
According to a 2021 study by LexisNexis Risk Solutions, there has been a substantial increase in cost and fraud volume. Australian card fraud grew at 5.7% and cost Australian businesses ~3.51 times the amount lost.
The good news is that advanced technology is available to help protect you and ensure you won’t be part of the statistic.
Here are some basic security features you should look for in your payment system.
- Tokenisation – A security feature encrypts sensitive payment details into a ‘token’ unique to the wallet/merchant. This feature reduces the risk of cards being cloned or used fraudulently.
- 3D Secure (3DS) – This feature requires customers to complete an additional verification step with the card issuer when paying.
Upcoming payment technologies to eliminate late payments in B2B
Here at ezyCollect, our mission is to eliminate late payments. We’re trying to change the culture in B2B payments by creating mutual value. By creating value across the chain, there is a more significant likelihood that your customer will be willing to work with you regarding processes and tech.
Smart Contracts – Automating Order to Cash Conversion
Smart contracts are self-executing digital programs that automate agreement terms between parties. They contain code that defines the terms of an agreement, such as the conditions under which payments will be made or goods will be delivered. Once these conditions or rules are met, the contract is automatically executed without human intervention.
Thillustration above shows how smart contracts can improve your order-to-cash process and eliminate manual tasks. It’s a game-changer
Smart Contracts in O2C
From the day customer raises a purchase order, the smart contract starts to work with rules of item details, payment methods, terms, discounts, and finance options. The SC also automatically creates the sales order into the ERP and ships goods. When that invoice is due, the SC executes based on the set rules, payments are automatically collected, and the invoice is automatically closed.
Commitment to Pay: A Smart Contract
One of the ways we at ezyCollect leverage the power of smart contracts is by building a solution to strengthen your client’s commitment to pay. With a Commitment to Pay, you get authorisation for a single order. Payment will be collected based on the payment terms or when an invoice for a specific order becomes due.
There are different scenarios when a Commitment to Pay will be helpful for your business, and we can configure the solution according to your needs.
1. Single transaction commitments
Single transaction authorisation that respects the account payment terms.No payment right away, just a commitment from your customers that they will pay via direct debit collection on a future date.
The authorisation request can be embedded in any payment process, whether you have an e-commerce store or receive purchase orders via email or phone.
With this commitment, the contract fulfils the order and returns the payment to the accounting system.
2. Flexible commitments
With flexible commitments, the outstanding balance can be paid in instalments through a commitment to pay.
The process is similar to milestone/instalment payments but using Smart Contract technology—certain events/ milestones in the 02C process trigger when the contract rules will execute. For example, half of the payment is automatically collected upon purchase order. The subsequent payments will execute to collect when the stock is available for shipping and then upon delivery of the items. These will all happen automatically in the background, respecting the rules/ conditions of a client’s contract.
3. Advanced authority Terms
Incentives are a great way to encourage your clients to pay earlier or opt for direct debit authorisations. This incentive will also change how you look at providing direct debit payments to your clients: How much is it worth it, or what is your current cost by doing all these manual tasks? And if you receive payments on time, what is worth having that cash in your cash flow at the time you expect it?
The smart contract of Commitment to Pay will allow you to integrate those discounts easily, as well as extended payment terms and deposit plans in your O2C process. These advanced terms are configurable according to your unique process and will be automatically synced to your accounting system so you can fulfil orders faster.
NPP/PayTo
Since its launch in 2018, the New Payments Platform (NPP) has facilitated real-time clearing and payment settlement between participating financial institutions in Australia. Services from the platform, such as Osko for near real-time payments and PayID that links your mobile number, email or ABN to your account as a simple way to direct payments, have made payments easier between organisations.
In 2023, we’ll see more organisations connecting to NPP to process faster, simpler and smarter payments. This includes exploring the new service, PayTo, that will help businesses pre-authorise payments as an alternative to direct debits in a scalable and secure platform.
Incorporating NPP services, particularly PayTo, aligns with ezyCollect’s mission of ‘0 days late’, and we look forward to making these technologies available to our clients.
B2B payments in ezyCollect: Pay Now in SMS, Collect Now in Bulk, and more
Current ezyCollect features that helps you eliminate late payments
With so many new and exciting technologies to look forward to, present technologies are now available to provide simpler and smarter payments and make collecting and processing payments easier for you and your team.
Here are the solutions you can now use in ezyCollect:
- Embedded payments platform: clients can use our payments solution as part of their website
- Collect Now for Invoices: collect payments from invoices through direct debit
- Collect Now for Sales Orders: collect payments from sales orders through direct debit
- Auto Collect: Schedule payments through direct debit
- Automated Balance Payments: automatically collect the outstanding balance before fulfilling the order
We continuously leverage and explore the power of payment authorities to allow you to collect invoices whenever you want or even leave them in an automatic schedule where the invoices are collected automatically when their due date comes.
Better payment experiences grow your business
On-time payments are crucial to a strong cash flow; the latest payment technologies can help you achieve that. With more cash in your business, you can fund your growth and ensure resiliency in economic uncertainties.
If you’re interested in improving your order-to-cash process with a streamlined payments process, speak with one of our payments experts today to learn about options for your business.
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