Why Now Is the Time To Embrace Digital Payments

For B2B businesses who have yet to ditch their paper-based invoicing processes and still rely on checks as their main method of taking payment, their reasons for not making the switch to digital are becoming harder and harder to justify.

Current macro-economic trends make it clear that to succeed, businesses need to put systems in place for accepting digital payments if they haven’t already—and fast. Beyond helping your business stay afloat in a remote world and meeting customer expectations, digitizing your payment channels and accounting processes minimizes effort, reduces costs, and accelerates cash flow.

In this blog, we’ll be delving into the economic trends signaling why it’s time to make the transition to digital payments, and what’s at stake for companies who choose to stick with their legacy processes.

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Why the Hesitation With Digital Payments?

But first, what makes finance and accounting teams hesitant to accept more digital payments in the first place?

Compared to waiting for checks to arrive in the mail and depositing them yourself or through a lockbox service, the relative immediacy of digital payments seems like a clear winner. The hitch for many businesses when it comes to accepting ACH payments—among the most popular electronic payment methods—is the effort they create for cash application because payment and remittance data must be matched after the fact. 74% of financial professionals surveyed by AFP said a lack of standard format for remittance information was a barrier to increasing their use of electronic payments.

Other digital payment methods that transmit remittance information along with the payment—like credit cards for instance—have challenges of their own. Many businesses are deterred from increasing their acceptance of credit card payments because of concerns over high processing fees and high manual effort involved in managing payment authorizations.

The good news is there’s technology to resolve all these challenges. Getting customers to pay you through an online portal helps with capturing the data needed to apply cash in the right place and many accounts receivable (AR) software options allow you to automate matching of remittance files with their respective payment. Working with a payment processor that uses interchange optimization can also help lower credit card processing costs.

With many solutions available to help your business easily accept digital payments, any doubts whether you should digitize your payment channels should slip away—especially considering how markets have changed since the pandemic.

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3 Reasons Why Businesses Are Moving Towards Digital Payments

1. B2B Customers Expect Consumer-Like Experiences

With the Amazons and Ubers of the world having conditioned us to expect ultra-convenient purchase experiences, it’s no surprise that B2B customer experiences are increasingly modeling themselves after B2C.

Ecommerce has grown considerably as a B2B payment channel, especially as companies pivoted online to maintain business continuity during the onset of the pandemic. As a result, B2B buyers are more comfortable making large purchases online, with 70% of decision makers saying they’d be open to making fully self-serve or remote purchases valuing over $50,000 and 27% saying they’re open to spending over $500,000.

Since having to adopt digital sales channels due to COVID-19 restrictions, both buyers and sellers are finding they prefer this arrangement, with over three quarters of them saying they prefer digital self-serve and remote engagement over face-to-face interactions. As B2B buyer behavior continues to migrate online, having systems in place to accept digital payments will be the expectation for your business.

2. Millennials Make Up the Largest Share of the Workforce

In 2016, Millennials became the largest generation employed in the US labor force, eclipsing both Boomers and Gen Xers. Accounting for 35% of the workforce, Millennials’ experiences play an important role in shaping the course of businesses’ operations. Process-heavy roles—of which accounting is chock full—don’t appeal to this generation as much as their predecessors and filling those roles will be near impossible for organizations that don’t shift their approach.

Augmenting processes with accounts receivable automation can eliminate many of the manual tasks that take up AR teams’ entire days, freeing them up to focus on higher-value tasks likely to be more personally fulfilling. And with a team that derives higher satisfaction from their work, you’ll be able to drive more strategic initiatives that benefit the business. Creating the digital payment ecosystem that allows for this level of efficiency and automation is the first step to achieving this, and getting your customers paying you online is a big piece of it.

3. Remote Work Is Here to Stay

The sudden shift to a remote workforce at the onset of the pandemic exposed just how flawed checks are as a payment method. With no one in offices to cut or pick up checks and a postal system overwhelmed by demand, businesses had to adapt payment processes quickly to support the mission-critical priority of maintaining cash flow.

Even after COVID-19, it appears that most offices will operate remotely to some degree. A Gartner survey found that 74% of CFOs intend to shift at least 5% of previously on-site employees to permanently remote positions after the pandemic. To adapt to these fundamental changes in the way we work, accounting processes will need to accommodate for some share of employees working remotely long-term. Embracing digital payments reduces your dependance on the paper-based processes that require teams to be in-office.

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What Happens If You Don’t Accept Digital Payments?

While the prospect of uprooting existing processes makes many accounting and finance leaders slow to enact digital transformation, what they may not realize are the risks of failing to offer what customers are begging for.

Choosing not to offer your customers the option to pay digitally can impact the overall health of your business in three key ways:

1. Revenue Loss

Today, customers prioritize making purchases based on the most convenient option, even if there are cheaper alternatives elsewhere. With the barrier to switching suppliers lower than ever, a negative billing and payment experience could be enough to make a customer end their relationship with you. If any part of doing business with you is difficult, customers will seek the more convenient alternative—which could be your competitor.

2. Falling Behind Peers

Part of mitigating the risk of losing out to your competitors is understanding where they might be in their own digital transformation journey. A PYMNTS.com report from the fall of 2020 found that 83% of B2B companies surveyed changed their AR processes since the beginning of the pandemic and 66% are receiving more digital payments. For their part, customers are eager for this change, with 60% of financial professionals reporting they’re likely to convert most of their payments to suppliers from checks to electronic payments. Embracing digital payments and adapting AR to support them can mean the difference between keeping up with and falling behind your peers.

3. Operational Challenges

Beyond maintaining positive customer sentiment by delivering an optimal experience, making the shift to digital payments has implications for your internal operations too. Paper processes and the labor required to support them can cost your business. Simply processing a single check costs between $4–20 on average according to Bank of America. These manual processes also slow down the speed at which you get paid, driving up Days Sales Outstanding (DSO)—by 30% according to PYMNTS.com, reducing cash flow, and limiting your business’ agility.

COVID-19 significantly accelerated the rate at which businesses are digitizing their operations. The way things are going, any company that can’t support digital payments will be an outlier. The longer you wait to kick off the process of digitizing your customers’ payment experience, the further you’ll be setting back your business. Get started on your digitization journey now.

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How to Protect Your Website from Credit Card Testing

A recent study by Nilson Report found that in 2019, card-based payment systems worldwide generated fraud losses of $28.65 billion, amounting to just under 7 cents for every $100 of total volume.

By 2027, this number is expected to increase by nearly 35% to $38.50 billion.

While credit card fraud has been steadily increasing since 2013, the coronavirus pandemic has fueled explosive growth in fraudulent activity, and projections show no sign of these trends slowing down. According to Julie Fergerson, CEO of Merchant Risk Council, digital attacks become more successful in every economic downturn, and we should fully expect credit card fraud numbers to increase significantly over the coming years.

Fraud prevention is a never-ending game, and business-owners—particularly those managing an ecommerce storefront—need to remain vigilant. With credit card fraud increasingly affecting card-not-present and ecommerce environments, and  fraudsters constantly evolving their mechanisms for testing the validity of credit card information, it’s imperative you protect your website from credit card testing.

In this blog, we’ll discuss how credit card testing impacts your business, how fraud prevention tools help you remain vigilant and proactive, and tactics you can implement to mitigate and protect your business from unauthorized attacks.

What is credit card testing?

But first, what is credit card testing?

Credit card testing is a malicious attack on a merchant’s website or shopping cart. It’s triggered by a bot or automated script and tests lists of illegally obtained credit card information to identify valid cards. Essentially, fraudsters are repeatedly testing stolen credit card information to make illegal purchases. You may hear the terms account or authorization testing, carding, and card checking used interchangeably with credit card testing.

Unfortunately, this kind of fraudulent activity  is an unavoidable and common occurrence with ecommerce. That said, there’s a lot businesses can do to protect themselves.

Why does credit card testing happen?

In many cases, card testers will have stolen or obtained credit card information illegally. Since they’re unaware if the information they’ve received or generated is valid, they’ll need an engine—some type of trigger—to determine if it is.

Enter, your website.

Credit card information is often stolen over a period of weeks or months, and authorization testing is used to discover which cards in the fraudster’s database can be excluded and which can be used for fraudulent activities. Authorizations are the preferred method of card testers, as they rarely appear on cardholder statements—meaning the cardholder is unlikely to notice, let alone report fraudulent activity.

Another tactic fraudsters use to test the validity of credit card information is to make small purchases, which are also less likely to be noticed and reported. Online businesses that accept donations or facilitate transactions of small value make ideal targets for this manner of testing.

It’s worth noting that stolen credit card information isn’t used exclusively for making online purchases. The details fraudsters obtain are frequently sold in marketplaces on the dark web—networks on the internet that require software or authorization to access.

How does credit card testing impact merchants’ business?

Credit card testing can have many adverse effects on your business.

For instance, there are the fees you incur from authorization testing. Whether card checking tests are successful or not is entirely irrelevant—you’ll still incur fees for every attempt made. Making matters worse is the fact that these fees are typically non-refundable. You can imagine the significant financial impact this can have for businesses if credit card testing attempts increase over time.

Larger businesses are better positioned to withstand  these attacks—even if there are substantial losses. Smaller businesses, however, can easily crumble in the event of a large attack. A loss of $5,000-$10,000 might not be significant for many, but for others, it’s the difference between making payroll and bankruptcy.

It’s important to be cognizant that these types of attacks are fast and furious. Fraudsters can execute them at various intervals, potentially attempting hundreds or thousands of tests per hour depending on which mechanisms they have in place. Identifying and then mitigating or preventing fraudulent activity as soon as possible should be high on all online merchants’ priority lists.

Another adverse impact of credit card testing is the strain it creates in your organization. These attacks will likely result in your team spending an influx of time identifying which approved transactions are actually valid and require shipment of products and goods, and which are fraudulent and need immediate intervention.

Beyond these two  outcomes, credit card testing can wreak havoc in many other ways, especially when you consider the time and money it costs cardholders to dispute fraudulent payments, the damage inflicted on your business’ reputation from increased card decline rate, and the burden on your infrastructure due to surges in traffic.

How do fraud prevention tools help merchants?

Depending on which payment processing solution you have in place,  fraud prevention tools such as address verification, card security codes, and velocity checks can likely be enabled. These tools are instrumental in reducing the risk of potential fraudulent chargebacks. But preventing fraudulently obtained cards from placing orders and making purchases is only half the battle.

In many instances where fraud detection is used, a fraudulent transaction attempt will still be sent to card issuers—the financial institutions that provide cards and credit limits to consumers. Despite your having already prevented an order from being placed, these issuers will still attempt to validate the information the fraudster provided. When that happens, you know you haven’t truly prevented your business from authorization testing or from incurring fees associated with authorization attempts.

How can merchants protect themselves from credit card testing?

The first step in preventing credit card testing is to engage your web developer or evaluate your website’s ecommerce shopping cart for ways to monitor, prevent, and block incoming fraudulent activity on your website. Below is a list of five practices we strongly encourage implementing.

1. Add a reCAPTCHA feature

A CAPTCHA is a system that enables web hosts to distinguish between a human and a robot  accessing a website. In other words, it protects websites from spam and abuse. Many card testers use automated scripts to run high volumes of tests, which can be blocked using a CAPTCHA.

Google’s reCAPTCHA—a type of CAPTCHA that asks users to decipher text or match images—is very effective at blocking credit card testing. The latest versions of reCAPTCHA run automatically when users load pages and never interrupt users. To ensure your reCAPTCHA is performing as effectively as possible, you’ll want to double-check it’s being used to authenticate all requests that enable card validations or payments.

Your reCAPTCHA can be either visible or invisible. Feel free to test both solutions—or an entirely different CAPTCHA solution—to see which works best.

2. Ensure  your website is validating  on both the frontend and backend

Your website frontend is where your customer enters their credit card information. The backend is the programming that processes credit card transactions. It handles the direct communication to the payment gateway where transactions are processed, typically via API token.

An effective way to deter  credit card testing is to require a login or session validation when your customers perform specific tasks—such as making a payment or creating an account. Fraudsters typically bypass your website’s frontend and target the backend  directly, so having these measures in place will help to prevent that from happening.

3. Create a velocity logic ruleset

Velocity checks monitor specific data elements  occurring in specified intervals within a brief period and  are critical in fraud prevention efforts. To reduce incoming fraudulent activity, we recommend creating a velocity logic ruleset that filters card authorization test attempts by IP address, dollar amount, and repetition,  then blacklist any IP addresses that meet your criteria. Here are a few things to consider:

  • Small transactions – Create a logic ruleset that sends alerts for repeated small transactions from same credit card numbers or IP addresses.
  • Large number of purchases over a short period of time – Fraudsters design bots to transact as frequently as possible, as quickly as possible. Ensure a logic ruleset is in place that notifies you of when an abnormally large number of purchases occurs during a brief window.
  • Designate teams to action notifications – Appoint a contact or team within your business to be notified when any of your controls have been exceeded—this includes frequent small and abnormally large transactions, and any other filters you deem necessary. This will allow you to quickly take action and stop any incoming fraudulent activity as soon as it’s identified.

4. Identify illegitimate traffic and behavior

Once your velocity logic ruleset is in place, you’ll be able to confidently identify credit card testing behavior by comparing it with traffic you’d typically consider to be legitimate.

Another tactic to assist in identifying fraudulent activity is to view backend server logs, where you’ll most likely see a significant increase in declines when attempted fraud happens. Credit card testing declines are usually identified as failed request logs or 402 errors. This error code indicates that payment cannot be processed for a particular reason—either the transaction was declined by the processor, the payment gateway, or even the issuing bank. A high volume of failed requests is indicative of credit card testing.

5. Partner with a secure payments provider

The ramifications for failing to detect credit card testing can be devastating. Without proper detection and security measures in place, fraudsters can inflict massive, costly damage to merchants. The above five practices should be implemented regardless, but this fifth is perhaps more important than all the rest. By integrating your business with a payments solution that has a strong risk management engine and a track record of preventing fraud, you can have peace of mind as you collect payments and remain focused on growing your business.

Make it hard for those who want to defraud you

Merchants must be increasingly vigilant against fraud attempts, more so in this digital economy than ever before. The consequences of falling victim to credit card testing are too great to simply ignore this threat.

Fraud is an ever-evolving activity with an inevitable presence. Colin Sims, COO of Forter, a fraud prevention company, recently expressed pessimism about card fraud ending and elaborated that as long as money is being transferred digitally, card fraud is going to be a problem.

It’s up to you to take steps to prevent the damages of fraud and protect your business from unwanted, unauthorized attacks.

In addition to fraud prevention, learn what else you can do with an online payment solution here.

Putting the Spotlight on Women-Owned Businesses: Earth Rated

As we near the end of Women’s History Month, we wanted to put the spotlight on a woman-owned business in our network that exemplifies strong core values and innovation.

Earth Rated is a Canadian company that creates products designed to make cleaning up after pets as simple as possible. Co-founded in 2009 by Monica Sposato and her four friends, the company began with dog waste bags but has since expanded to offer a variety of pet care products, sold in stores across 40 countries and online.

It All Started With Poop Bags

As pet parents themselves, Earth Rated’s founders came together to address a clear gap they noticed developing in the market. “We recognized a need for great quality yet affordable waste bags after buying overpriced bags from a local boutique pet store,” says Monica. “The realization was that as plastic bags were being phased out, there would be a growing demand from pet parents and the pricing needed to be accessible. More than 11 years later, we are now offering a range of cleanup products.”

One of Earth Rated’s most popular products is its bag dispenser that clips onto your dog’s leash.

Making it easier for pet parents to clean up after their pooches is also a big win for the environment. Improperly disposed pet waste is classified by the Environmental Protection Agency as an environmental pollutant, with each gram of dog poop containing over 23 million bacteria. Earth Rated even offers compostable bags to make cleanup easier on the environment.

What people may not know is just how much goes into creating pet care products. “A common misconception is that the barrier to entry in the pet industry is easier than most industries or that products are easily replicated,” says Monica. “But pet parents care a lot about their pets and the products they buy for them. From the moment Earth Rated was started it was always about so much more than just poop bags. We wanted to build a company that people could trust, that valued their customers, offered thoughtful solutions to their everyday needs and that was accessible.”

Supporting Women-Owned Businesses During the Pandemic

Despite a challenging year for most businesses, Earth Rated was able to grow its team and business over the last year. You can imagine that demand for quality pet care products hasn’t slowed—people are spending even more time with their four-legged friends since transitioning to working from home.

Growth during the pandemic is unfortunately far from the norm for women-owned businesses. In fact, research shows that across North America, businesses led by women were slower to recover from the pandemic than those led by men. A survey of men and women business owners found that on average, women-owned businesses have taken three times longer to recover than those owned by men—and have still not risen back to pre-pandemic earnings.

With the effects of the pandemic having budding women entrepreneurs feeling less optimistic about pursuing their ventures, heightened visibility of successful women-owned businesses—like Earth Rated—can keep women founders on the path to entrepreneurship. Supporting women entrepreneurs is matter of public interest too—a 2019 analysis from Boston Consulting Group estimated that if women and men participated equally as entrepreneurs, the global economy could gain an additional $2.5 to 5 trillion.

When asked for her advice to other women leading companies in 2021, Monica highlights, “push boundaries and be confident in your decisions. As a leader and certainly as a business owner, it’s important to have a vision and communicate it. At times you need to make difficult decisions or at the very least bold ones, so owning your expertise is paramount.”

Monica Sposato is the co-founder of Earth Rated.

Women are prominently represented across Earth Rated’s employee base, making up 73% of the team and 56.25% of leadership.

Putting Pups First

Earth Rated’s beginnings came from a deep commitment to pet lovers—and of course the dogs themselves. This has carried through in their outreach efforts. Since it was founded 11 years ago, Earth Rated has donated over 7 million dog waste bags to shelters, rescues and pet foster families and kept over 10,000 dogs and cats warm through their shelter blanket program.

Earth Rated and Versapay

Searching for a payment processing solution that would provide the top-notch customer service they were missing with their previous processor and offer the depth of integration they needed as they implemented NetSuite, Earth Rated found Versapay in 2020. The company now uses our Solupay for NetSuite solution to process payments. “Solupay was extremely easy to integrate, and we received great service from the beginning,” says Monica.

Why a Great Customer Experience Is What’s Missing From Your Accounts Receivable

According to a recent study by Pew Research, Americans’ reliance on physical currencies is lessening, with roughly 30% admitting to making no purchases with cash during a typical week. While this might not come as a shock to anyone, especially long-time advocates of going cashless, this trend is indicative of a larger movement, which is that digital payment methods are shaping the future of customer experiences and commerce overall.

We’ve seen a radical shift in how businesses are adapting to what their customers are demanding—from both a payments and customer experience perspective. Business-to-consumer (B2C) companies like the Amazons and Ubers of the world played a part in leading this change by making the payment experience as frictionless and efficient as possible and putting their customers in the driver’s seat.

Unfortunately, the response from the business-to-business (B2B) community has been less proactive. This is especially true when segmenting by business function and narrowing in on accounting and finance teams. Many organizations haven’t yet streamlined their billing process and when attempting to, failed to address the core pain their customers are experiencing. 

Those companies that have taken the first step and automated their AR process are better positioned than most, though a high degree of friction in the payment experience still exists, and it’s high-time B2B entities recognize this. To address the root cause of common hurdles to effective accounts receivable management, businesses need to think holistically about their AR—and it starts with the customer.

With that in mind, here are four steps you can take to reinvent your accounts receivable process and enhance your customer experience. In doing so, you’ll not only provide a more integrated and enjoyable payment experience but also get paid faster and drive higher retention rates and sales growth.


Step 1: Let your customers pay how they want

A 2020 survey into B2B payment behavior revealed a massive increase in late payments across North America. In fact, 43% of the total value of issued invoices was unpaid by the due date, which is a sharp increase from 25% the year before.

While much of this delay can be attributed to—either directly or indirectly—COVID-19, a more deserving culprit is the lack of viable payment methods available to customers. The pandemic won’t be permanent, but its impact on how consumers and businesses make purchases will be.

By providing customers with a diverse suite of payment options—ACH or credit card for instance—accounts receivable leaders can directly influence their likelihood of being paid on-time or even early. The smoother the payment experience—the less barriers and hoops a customer is forced to jump through—the easier it will be to pay, and the happier they’ll be to do so.

More than ever cash preservation is a key priority for CFOs, and accounts receivable is increasingly becoming an important lever for this. And, with COVID-19 disrupting daily business operations and it being harder than ever to forecast cash flow, CFOs are looking to build a bigger liquidity buffer. By removing obstacles to payment and letting customers pay the way they want, AR teams can speed up the order-to-cash cycle and accelerate working capital.

Step 2: Connect accounts receivable and accounts payable systems

Another step in further enhancing accounts receivable through customer experience is to establish digital connectors between systems at both ends of the transaction—your accounts receivable system and your customer’s accounts payable system. This ensures direct and seamless communication among systems, helping your AR to evolve from a system of record, to a system of engagement and insight.

Traditional accounts receivable technology is often supplier-controlled, reliant on email-based communication, and targets back-office efficiencies. Modern AR systems focus instead on connecting buyers and suppliers to provide exceptional customer experiences, heightened visibility into invoices—past, present, and future—and payments, and personalized in-platform communication. These systems are also data-driven and provide customers with the self-service tools they need to manage their accounts.

Keep in mind, whatever insights can be gleaned as a result of this integration must be accessible by suppliers and buyers. It’s vital both parties are able to reap the benefits of shared data and use it to make strategic decisions. When all customer information and activity—conversations, payments, disputes, etc.—is aggregated in a centralized repository that AR and AP teams have unfettered access to, there is significant reduction in payment friction.

How companies collaborate and engage with their customers has a significant impact on accounts receivable. To learn more about why a focus on the customer is necessary to reinventing your AR processes, download this complimentary report from The Hackett Group.

Step 3: Make end-to-end data accessibility and transparency a priority

The accounts receivable process has traditionally been one-sided. Even modern AR systems tend to favor the supplier and fail to provide value to customers—often resulting in too few customers adopting these payment portals and preventing the critical user mass needed to see an impact.

As mentioned earlier, suppliers have a lot to gain from digitizing their customers’ payment experience, but like everything we’ve discussed so far, the customer’s needs must be prioritized.

Providing customers with greater visibility into their accounts means they have a better idea of their payments owed, outstanding credits, deductions and other charges—meaning fewer back and forth emails and phone calls with you. It also means you and your buyers can save time, leverage payments terms, personalize and automate collections outreach, and assess the true value of your relationships.

Unfortunately, customer buy-in and adoption rates for accounts receivable solutions tend to be low. A key reason for this is that visibility into amounts owing, payments and data is lacking in existing billing and payment processes. That central repository we mentioned earlier is the catalyst for helping customers gain visibility and insight into their accounts. When data is accessible by all and considered truthful by all, suppliers can secure customer buy-in, leading to higher levels of adoption.

Low customer adoption rates frequently prevent businesses from realizing efficiencies and benefits from new systems. If your customers don’t get value from using your solution, they won’t use it.

Step 4: Focus on communication and collaboration between buyers and sellers

The most important facet of improving the customer experience within accounts receivable is focusing on communication and collaboration.

Much of what makes B2C payment experiences so human and uncomplicated, is the open dialogue that ensues across the entire journey. Buyers can comment on products or services, easily connect with suppliers, and in many ecommerce instances, chat directly with subject-matter-experts in real-time to discuss concerns and resolve disputes.

To bring this phenomenon into B2B payment experiences, you’ll want to leverage a solution that enables two-way, completely trackable communication, and actively encourages suppliers and buyers to engage and interact with one another.

By centralizing communications in one place—where suppliers can simplify and enable online discussions with customers about their payments—collections efforts and dispute resolution can be sped up exponentially and, in some cases, entirely circumvented.

Beyond disputes, enhanced communication and collaboration between buyers and sellers means streamlining and optimizing that front-office experience where interactions occur. There’s a positive correlation between continuous, open communication and customer sentiment, which almost always results in you getting paid faster.

Many collections professionals still rely on outdated communication channels—think emails, phone calls, and dunning letters. These approaches are highly manual and aren’t a good use of your resources. To address customers’ concerns, enhance their purchasing experience, and free up your employees to perform more meaningful tasks, look for accounts receivable software that offers in-platform communication.

The experience of making a B2B transaction doesn’t need to be wholly different to its B2C counterpart. The lack of ‘consumer’ in the title is not reason enough to forget that people are integral elements in the purchasing experience. For B2B companies, it’s time to account for and adapt to changing buyer expectations and realize that billing and payments are essential parts of the customer experience.

By providing diverse payment options, connecting AR and AP systems, making data accessible, and focusing on communication and collaboration, you’ll be able to provide your customers with a better billing and payment experience and ultimately get paid faster. 

How companies collaborate and engage with their customers has a significant impact on accounts receivable. To learn more about why a focus on the customer is necessary to reinventing your AR processes, download this complimentary report from The Hackett Group.

3 Things I Wish I Knew in My Time as an Accounts Receivable Specialist

Every accounts receivable (AR) specialist—as with most professions—would probably tell you that there are some aspects of their job they don’t like.

Working as an accounting clerk in AR during a previous internship, I learned this firsthand. In this blog, I’ll tell you what those pet peeves were for me, and more importantly, the three things I know now that would have made my life much easier.

In that previous internship, I primarily dealt with collecting payments from customers. It sounds straightforward, but if you’re in the industry, you know it involves a substantial amount of communication with customers. Working at a company with traditional AR practices, my day-to-day revolved around sorting out minor invoice disputes, chasing individuals for payment, and rushing to mail out supporting documentation.

In doing these tasks, I quickly came to the realization that the right communication style can foster healthy relationships with customers—alternating between lengthy phone calls and wordy emails will not.

Let’s fast-forward. I’m now a 4th year accounting student at the University of Guelph and am enjoying a work-term with the marketing team at Versapay. As I learned more about our accounts receivable automation software and payment solutions during my initial onboarding, I kept thinking back to my previous role as an accounts receivable specialist and how much easier my job would have been if the company I’d worked for had been a customer of Versapay.

With that in mind, here are the insights I wish I had had back then, now that I’ve seen what’s possible by digitizing accounts receivable.

1. AR Specialists Should Be Strategic Partners, Not Pencil Pushers

It became evident to me early on that scrambling to collect late payments is a common occurrence for many companies. The reasons customers gave for not paying varied and would range from refusing to pay an invoice in its entirety if a promised discount wasn’t applied, to not being able to pay via their preferred method—often credit card.

These potentially avoidable delays resulted in my having to constantly phone customers to follow up on their payments, often during the end of the month—a busy period—which gave the impression that I was being aggressive or unsympathetic.

Many times, discrepancies had to be verified by additional people from other departments in my organization like customer service, complicating the collection process and creating a negative experience for the customer (and myself). To no one’s surprise—yet to everyone’s dismay—the whole cycle would repeat itself month after month after month.

I found myself spending a lot of time on repetitive and mundane tasks—like sending payment reminders and email alerts—rather than focusing on customers who were truly unable to pay.  When I finally got the opportunity to review and assess those priority accounts, resolving their disputes and receiving payment was a lengthy process since the information and documentation I needed was scattered. I would often be sifting through mountains of invoice and payment documents trying to spot patterns in a customer’s account history to shed light on why payment was delayed and what course of action would work best.

Fellow AR people, it’s exhausting, right?

I was floored by how inefficient our processes were and demoralized at how poor the experience we were providing our customers was. When I learned about Versapay’s AR automation solution—ARC—and how it automates many of the tasks I used to spend days on, it made me think that the accounts receivable function could be put to better use, and AR specialists such as myself could have a more strategic role in shaping how companies do business.

2. Offering Flexible Payment Methods Gets You Paid Faster

Businesses often hesitate to offer a wide variety of accepted payment methods because of concerns around cash application, among other things. Luckily, accounts receivable automation opens up a lot of possibilities when it comes to payment flexibility. The ability to automatically perform complex matching of payments with remittance information eliminates these concerns, allowing customers more options in choosing how they want to pay.

Part of why companies might not accept credit card payments is because of concerns around high processing fees and high levels of admin work required. But, partnering with the right payment processor can remove this reluctance by lowering processing fees through interchange optimization, preventing chargebacks, providing control over surcharges, and updating expired cards automatically.

By letting customers pay how they want—whether it’s ACH, credit, debit, etc.—and for what they want—be it full invoices, multiple invoices, partial invoices, or line-items—you provide an exceptional billing and payment experience. This increased convenience for customers ultimately promotes faster payments.

Additionally, the ability to partially pay—due to open disputes, for example—helps to ensure satisfaction by giving customers the freedom to manage their money and indicates to AR specialists that they have the intent to resolve and pay.

Beyond helping customers pay faster, there’s also cash to be unlocked in streamlining back-office operations. By increasing operational efficiency with automation—especially around collections and cash application, you can significantly shorten the cash conversion cycle. 

3. Complete Visibility Into Customer Account Data Makes Managing AR Much Easier

A goal for accounts receivable specialists is to detect risky or questionable accounts early to ensure they are dealt with before they become a problem. When information is scattered, or there’s a delay in receiving that information, you are unable to detect the payment patterns identifying potential non-paying customers. I’ve learned that without transparency into customer account records—think back to my mountain of documents—it’s hard to make informed decisions. Limited visibility hinders the AR team from carrying out their responsibilities accurately and efficiently.

Having a real-time view into the status of your outstanding receivables and quick access to customer data makes the process of identifying non-paying customers much easier. With the right accounts receivable software, you have full transparency into your customers’ accounts—whether it’s their history, invoice details, payment records, or even their interactions with you. Complete automation and integration with your ERP mean that all your records are updated when payment is received. This gives you the most recent information on your customers’ accounts in one place, making it easier to manage and locate.

The shift from traditional AR practices to a modern platform can be intimidating to many businesses, but having worked with traditional AR practices, I can confidently say it’s necessary. With companies seeking to build stronger and positive relationships with their customers and employees—especially now in a remote world, digital transformation is no longer negotiable.

Representation Matters: Celebrating and Elevating Women in Fintech

Among the celebrations for International Women’s Day this past Monday, it’s been great to see dialogues emerge on the progress made in various industries to give women the recognition we deserve while acknowledging the structural inequalities we still face.

In an industry like ours that brings together two historically male-dominated verticals—finance and technology—this is an important conversation to have year-round. In this blog, we’ll be taking a look at how fintech fares when it comes to gender equity, sharing the experiences of some of Versapay’s own women leaders, and exploring how the industry can hope to close its gender gap.

The Fintech Gender Gap

A 2018 survey by Lend Academy found that women only make up 37% of employees working in fintech. This gap widens the higher you move up the corporate ladder and is most pronounced at the founder level. According to a Deloitte study, women make up just 7% of the fintech founder community.

So why is the gender gap so pronounced in the fintech industry? Deloitte’s Head of UK FinTech Louise Brett describes the issue as three-fold, where women in fintech aren’t just underrepresented as general employees and at the founder and leadership levels, but in the user base too. “It starts to look like an industry founded for men, run by men, making products for men,” she writes.

With few women prominently visible in the industry, biases undoubtedly arise. Having experienced what it’s like to be one of the only women in the room in her early days as an entrepreneur in the Payments industry, this is something Jayme Moss, Executive Vice President of Payments at Versapay saw first-hand.

Having co-founded Solupay, a leading payment services provider that recently merged with Versapay, in 2004, Jayme recalls what it was like to attend industry events with her male co-founder. “Every time we would go to these large events, everybody inevitably thought we were married,” she says. “That was basically saying, there’s no chance you’re the owner of this organization.”

Although such brazen comments would be harder to find nowadays, bias is still alive and well in the fintech industry.

Dual Roles

Another challenge women often face in career advancement is managing their return to work after having children. A survey run by LinkedIn found that although nearly half of working mothers take an extended break from work after having children, many of them face significant challenges when returning to work, among which is the perceived stigma that parenthood precludes women from being fully committed to their jobs.

It’s a long-standing struggle that leads some women to delay or simply not have children for fear of limiting their career progression. “I had this conflict in my head of being a career woman and determining when it would be okay to start a family,” says Carrie Barkes, Chief Financial Officer at Versapay.

“My husband and I were married for almost fifteen years before we had our first child. My plans for having our first baby were always delayed because I would tell myself ‘I need to do X in my career before I become a mom.’ I would tell myself that I wouldn’t have the same drive or commitment because I’d be focused on being a mom. I was incredibly mistaken. From my personal experience, my commitment and passion for my job have only elevated after becoming a mom. You can be a working mom and you can excel in your career.”

What We Can Learn From the Women in Fintech Who Break Through

Women’s representation within fintech leadership has significant impacts for helping other women rise within the organization. Deloitte research found that for each woman added to a C-suite, the number of women in senior leadership roles increased threefold.

When we as women see ourselves represented in leadership positions, it illustrates that the same advancement is possible for us. Mentorship programs are a great way to empower women in fintech with the tools to ascend to higher levels of management—which is where the corporate career pipeline tends to be leaky. A 2019 report from McKinsey & Company found that 48% of entry-level workers were women, whereas they only made up 21% of the C-Suite. The drop-offs are even steeper for women of color, who made up 18% of entry-level workers in 2019, but only 4% of the C-suite.

Even without formal mentorship programs, women can share their knowledge and experiences with other women and inspire them with the examples they set through their leadership. “I’ve been really fortunate to have a great support system in my career,” says Carrie. “I’ve been empowered through a mentor that really paved the way for my career by providing the right guidance and opportunities for growth. She built a workplace around accountability and transparency. You knew when you were doing things really well, and you had constructive feedback when you needed it.”

Feeling comfortable tapping into these support networks and accepting guidance from others is also essential in our path to success. “I had some people along the way who gave me a chance and I took that chance and ran with it,” says Jayme. “Each decision I made led me to where I am. There were a lot of people along the way who helped me, and I was willing to accept that help.”

What Fintechs Can Do to Drive Change

More companies are stating their objectives to improve diversity throughout their organization. For those goals to come to fruition, companies should start by assessing what their own unique challenges are for maintaining diverse talent and creating programs and initiatives targeted at solving them. Fintechs can start to see incremental change by:

  • Creating or spotlighting peer-to-peer networks and mentorship opportunities
  • Focusing on retaining women and not just recruiting them
  • Recruiting women for senior positions, addressing the leaky pipeline for women moving from entry-level to leadership
  • Treating diversity holistically and widening discussions beyond gender

Why We Must Empower Women

Beyond it being the right thing to do, research shows that elevating and empowering women at work is good for business. McKinsey & Company found that in 2020, companies that performed in the top quartile for gender diversity were 25% more likely to have above-average profitability than companies that performed in the bottom quartile.

Greater representation for women in fintech at all levels not only provides monetary benefits, but helps companies better serve their customers. “Women are needed at all levels to shape the conversations for our evolving organizations,” says Karli Vold, Senior Director of Product Marketing at Versapay. “Women are needed to reflect the voice of our market and clients. Women are needed in executive positions not just to show the value of representation, but to help us make better decisions. Women endorse and amplify each other’s ideas. They build more successful businesses, improve our societies, and make this a better world.”

The CIO’s Guide to Accounts Receivable Software

In high-performing organizations, IT leaders are always on the hunt for innovative solutions that will improve operational efficiency and accelerate company growth.

Because of its critical importance for maintaining healthy cash flow, the accounts receivable (AR) function is a prime candidate for this type of digital transformation. But without a deep understanding of AR and the challenges AR professionals face on a daily basis, knowing what functionality to consider and what solutions to evaluate can be challenging for executives outside of the finance organization.

In this blog, we’ll provide a crash course in AR for CIOs. For IT executives looking into accounts receivable software solutions, we’ll explain what accounts receivable is, what are some recurring challenges faced when managing AR, how accounts receivable automation software can address these challenges, and how to choose the best AR software.

What Is Accounts Receivable?

In the simplest of definitions, accounts receivable is any money that your customers owe you for past purchases of goods or services.

One way to think of AR is as a line of credit. The company supplying goods or services extends this credit to their customers with terms specifying when payments are due and includes other details such as sales discounts or charges for late fees. Accounts receivable is considered a current asset on your balance sheet because it can be easily turned into cash. Trade receivables are the same as accounts receivable and either term may be used interchangeably.

What Are Recurring Challenges of Managing Accounts Receivable?

Offering goods and services on terms is highly advantageous for suppliers. It allows them to establish greater customer loyalty by offering the ability to transact in good faith, paving the way for future sales. Suppliers can also generally sell more goods or services to more customers than if they were to just accept cash. And, under the accrual basis of accounting—where companies pay expenses before the associated cash is received—suppliers receive further gains from recognizing revenue at the time a credit sale is made, even if they haven’t yet collected the cash from their customer.

As you can imagine, despite these and other benefits, parting with goods or delivering services on the promise of payment in the future presents  challenges. Here are four common challenges AR teams face:

1.     Customers don’t pay on time, or within the agreed upon terms

2.     Errors in invoices lead to customer disputes and withheld payments

3.     Payments and payment remittance details take time to match, resulting in trapped cash

4.     Maintaining happy and healthy relationships with customers when disputes arise or there are issues with payment

Unless the right AR software solution is in place, AR operations can often be time-consuming and frustrating for team members and clients. Processes based on legacy systems or manual efforts can be ineffective and disconnected which leads to a lack of visibility into the status of accounts and cash flow.

Thankfully, there’s accounts receivable software that can help solve these challenges. For example, solutions that focus on automating common AR tasks empower finance teams to be more productive and efficient, removing stress and giving them back the time they need to accomplish meaningful work that gets cash in the door.

How Does Accounts Receivable Automation Solve These Challenges?

Accounts receivable automation is exactly what the name implies. It enables companies who rely on manual AR management to increase operational efficiency by automating the mundane tasks plaguing their daily work cycles. AR automation software takes on the tasks your team has determined to be most important—or tedious—to enable them to meet business objectives. This might mean automating invoice creation and delivery, or proactively sending supporting documents and payment reminders to customers.

Some AR automation solutions provide end-customers with a portal where they can log in to make payments and view their invoices. By giving customers their own payment portal, your finance team can be more in-tune with customers’ needs and payment behaviors. For example, with check usage in steady decline, it’s important for suppliers to accept alternative forms of payment, like credit card and ACH. Payment portals allow you to offer multiple payment options.

Beyond driving efficiencies, AR software also arms your team with data and visibility into your customers’ payment history in real time. With this insight, your finance team can tailor their collections and communications approach. They can incentivize customers to pay faster with more personalized sales discounts and engage them about late payments only when necessary.

Accounts receivable software also eliminates the cash application challenges of accepting multiple payment types by allowing you to accept them all from one place and automatically reconciling each payment with open receivables.

What’s Next After Automation?

Automating traditionally time-intensive tasks like invoicing and automatically applying payments to the right account is great, but it still leaves your team with a major time suck: managing disputes. Without an easy way to collaborate with customers, resolving disputes can be difficult—even under the best of circumstances and with the best customers.

With legacy AR tools and processes, fully understanding customer concerns often requires finance teams to play detective—tracking down why a customer made a partial payment on an invoice, for example. A customer-centric accounts receivable software solution empowers suppliers to collaborate with their customers to answer questions and avoid miscommunications. Removing friction and improving how you interact with your customers can significantly impact the billing and payment experience you deliver.

Important note: Not every accounts receivable platform takes this approach, so it’s critical to consider this early on when doing your research.

What Does an Automated AR Workflow Look Like?

You’ve now read some of the benefits accounts receivable software can have for your business, but you’re probably wondering what an automated AR workflow looks like in practice. In our blog The Accounts Receivable System Flowchart of the Future we answer this question in depth, describing the complexity of traditional accounts receivable workflows and how they can be improved using AR automation. In the flowcharts below, it’s clear to see how implementing the right automation platform drives efficiencies and helps you access your cash.

Traditional Accounts Receivable Systems Flowchart
Without accounts receivable software, the order-to-cash cycle is long and has your team going in circles to find out the status of open receivables. 
Accounts Receivable Systems Flowchart of the Future
With accounts receivable software, the order-to-cash cycle is much shorter and what used to be tedious tasks are completed automatically. 

Key Integrations to Consider

With most of your business’ operations flowing through your ERP, it’s critical that your AR solution integrates with your ERP system to reflect the status of your customers’ payments and accounts automatically. Integrating your systems helps your team get the most value from AR automation and maintain data reliability, as they can leverage all the customer data and organizational structures that already exist in the ERP.

Selecting a vendor that has deep pre-built connectors for your ERP will make for a quick and smooth implementation process. For system integrations and customization not already on the table, communicate your business’ needs in your initial talks with potential vendors to see how their team can support that additional layer of personalization.

How To Choose the Best Solution For Your Business Needs

Now that you have a clearer idea of what accounts receivable involves and the challenges to solve for, you might be wondering, “How do I find the AR software that’s right for my business?”

In our blog, The Buyer’s Guide to Selecting Accounts Receivable Automation Software, we share insights to help you better evaluate AR software vendors  and make an informed purchase decision. You’ll learn what you should think about before you start to research, how to manage your search once you’ve begun, and discover best practices you can adopt for the highest chance of success after implementation. We’ve even added a simple checklist you can download to help you compare your shortlist of vendors.

To effectively support your finance team in selecting accounts receivable software, it’s important that you understand the accounting process, the common challenges your team faces, and the role automation plays in addressing those challenges. When evaluating AR solutions, focus on the vendor who will be the best partner for your organization as you navigate an increasingly digital marketplace and changing buyer expectations.

The Buyer’s Guide to Selecting Accounts Receivable Automation Software

The global pandemic has made it more clear to businesses than ever before that cash is king.

Unfortunately, with the shift to remote work, the all-important tasks of managing cash flow and optimizing working capital have become exceptionally challenging. Legacy accounting systems are ill-suited for maintaining business continuity when everyone is working from home. They don’t provide accounts receivable (AR) professionals with the transparency, flexibility, and visibility into collections and cash management activities they need to ensure the business remains competitive and emerges through the economic downturn stronger than before.

Finance teams now realize this and are actively taking steps to modernize their AR processes, with nearly 60% of businesses surveyed by the International Data Corportation (IDC) planning to use a SaaS solution for accounts receivable in the next 12 months.

When choosing the best accounts receivable automation software for your business, it’s important you select a vendor that’s going to be the best partner for your organization, helping you deliver on your key requirements both now and as you grow. For B2B buyers researching their options, the 2020-2021 IDC MarketScape for Worldwide SaaS and Cloud-Enabled AR Automation Applications is an invaluable resource.

In this report, IDC identifies common challenges AR teams face when automation is not built into their processes along with advice for evaluating accounts receivable automation software. In this blog, we’ll discuss what these challenges may look like, break down some of IDC’s top recommendations, and offer our unique perspective on how to best narrow down your search.

We’ve even provided a downloadable checklist for you and your team to use during your vendor research to ensure nothing slips through the cracks!

For more insights to help guide your investigation and selection of AR automation software, you can access a free excerpt of the IDC MarketScape for Worldwide SaaS and Cloud-Enabled Midmarket Accounts Receivable Automation Software here.

Get the Excerpt: IDC MarketScape for SaaS and Cloud-Enabled AR Automation Software

The Top 5 Challenges Faced by AR Teams with Zero Automation

1. Cash Management

IDC cites cash management—which involves managing remittance information, applying cash, and posting payments—as the most time-consuming function for AR teams. Remittance data can come in a variety of file formats and must often be manually matched to its corresponding payment as the dollars and data don’t always travel together.

How many hours per week do you spend synchronizing remittance information and reconciling it with open accounts receivable? Probably too many.

When AR processes are digitized and automated, payments can be automatically reconciled and applied to their correct invoices.

2. Trade Promotions Management

Discounts are great for generating sales and incentivizing early payments, but if not communicated accurately—both to the customer and internally—they can cause headaches for your AR team. For instance, a sales rep may have promised a discount during the sales process that didn’t get communicated to Finance. So now that customer’s invoice is for the wrong amount and it looks like they’ve short paid when they haven’t.

Investigating and resolving disputes around unexpected short pays is one of the most time-consuming tasks for AR professionals, particularly when managed completely manually.

The right AR automation software can circumvent these types of issues entirely by providing customers and internal teams with complete visibility and transparency into what was agreed and what is owed, giving your team a single source of truth for all open receivables.

3. Credit Management

Businesses want to ensure they’re extending credit to the right people. Without convenient visibility into your customers’ payment history and behavior, reviewing and evaluating their credit worthiness can be an arduous task.

When you can point to certain trends in customers’ payment behavior—are they usually a few days late on payment but always pay the full amount?—you have a better idea of which accounts you can be more lenient with and which accounts you should double down on.

4. Payments

Without any automation in place, sending invoices and processing payments can eat up much of AR departments’ time, especially if still reliant on paper processes. PYMNTS.com found that these are the functions AR teams assign the most resources to, with 25% and 23% of staff dedicated to supporting invoicing and managing payments, respectively.

AR automation software does away with old-school paper processes by empowering AR teams to send invoices and accept payments digitally. By embracing online invoicing and payments, both customers and suppliers benefit from increased efficiency, convenience, and cost reduction.

5. Collections Management

No one wants to chase customers to get paid. Traditional collections—focused on phoning customers to remind them to pay and sending multiple dunning letters—can be exhausting work that takes your team away from high-value initiatives and potentially sours customer relationships.

Rather than using resources to hound customers for payments, work smarter—not harder—by automating your collections efforts so you’re only reaching out to the most at-risk accounts.

These are all challenges that create a significant strain on your team, hurting their efficiency and the speed at which your business can access cash as a result. When researching AR software, the ability to automate these otherwise time-intensive tasks should be core features to look for.

Now let’s look at how best to evaluate automated accounts receivable software.

Step 1: Before You Start Your Research

Your research will be made much easier if before firing up Google, you take some time to connect with the team members whose work would be directly impacted by an AR automation solution to learn what their main challenges are.

You’ll also want to take stock of any existing solutions your colleagues use so that you’re not duplicating what’s already in place, and if those existing systems aren’t meeting the team’s needs, find out why.

Some questions you can ask at this stage are:

  • What are the issues we would like to resolve and what are the risks of not doing anything?
  • Are these issues due to a gap in technology, knowledge and/or headcount?
  • Which internal stakeholders should we include in the evaluation processes?

Step 2: During Your Research

A principal factor in determining which vendor you ultimately choose should be how well they align with your business’ unique goals and values. If boosting customer satisfaction is important to you—which is greatly impacted by your interactions with customers when managing invoices, collections, and payments—does the vendor prioritize customer experience?

Some questions you can ask at this stage are:

  • Does the vendor have experience with my type of product, service, industry, and company size?
  • Does the vendor understand the regulations that will impact my business?
  • What is the vendor’s strategic investment outlook for the next three to five years?
  • Can the system integrate with my company’s other IT systems and those of my partners?

Step 3: How You’ll Ensure Your Success After Implementation

It’s equally important to consider what your partnership with your chosen vendor will look like post-launch. A solution that works out-of-the-box is great, but if your needs and existing systems are complex, you’ll want to work with someone who can support the customization you need to get the most value out of your AR solution.

If your accounts receivable automation software provides customers with their own payment portal, you’ll want to work out a plan to incentivize them to adopt it. After all, what good is a shiny new system if no one is using it? You’ll want a partner with the expertise to guide you in delivering a smooth experience and simple learning curve to customers.

Some questions you can ask in preparation for this stage are:

  • Does the vendor have a strategy to encourage rapid adoption among employees and customers?
  • Does the vendor provide the right amount of training for employees to master the new features with the system?
  • What support can the vendor offer us to ensure our ongoing success post-implementation?

Creating Your Criteria List

The list of criteria you use to evaluate accounts receivable automation software will of course depend on your organization’s unique priorities and IT requirements, but the chart below can act as a helpful guide in knowing what to look for. When you’ve narrowed down your top three options, comparing them visually like this can help you easily determine which vendor should be your top choice.

Vendor Checklist for Accounts Receivable Automation Software

5 B2B Payment Trends That Will Define 2021

With the pandemic still ongoing, 2021 eludes any possibility of making definite predictions. But, the shockwaves of 2020 have made it clear what businesses need to focus on this year.

“There’s no crystal ball that can tell us how long the pandemic will continue to impact how businesses operate and collect payments, but we can safely assume it will be for most of 2021,” our CEO Craig O’Neill told me earlier this month. “Most workers won’t return to in-office activities and won’t be able to write or process checks, so it’s critical they take their finance processes digital now.”

Coming off the tail end of a turbulent year, the defining themes for B2B payments in 2021 are shaping up to be:

  • The need to optimize processes after the shift to remote work saw businesses hastily adopt electronic billing and payments
  • Reducing friction and providing transparency through greater access to data for both buyers and suppliers
  • Enhancing collaboration between buyers and suppliers to simplify processes

In this blog, we’ll break down the top five B2B payment trends that will shape 2021.

1. Digital Transformation Will No Longer Be Negotiable

Finance teams that are still hesitant to digitize their accounts payable (AP) and accounts receivable (AR) processes will find they’re being left behind.

After having to pivot to digital commerce models due to the pandemic, many B2B buyers and suppliers now prefer these new channels. They see that before making the switch, they were falling short of customer expectations and undermining their operational efficiency.

Research from Gartner points to the “consumerization of the B2B commerce experience,” where “businesses that support and encourage digital commerce and digital payment will see faster growth and increasing market share compared to those that do not.”

2021 will be an important transitional year, as the 70% of B2B businesses who plan to implement new tech to help them manage their AR take the steps to do so, and the remaining 30% come to the realization that they need to do the same.

2. The Decline of Checks Will Be Steeper Than Ever

While consistently in decline in recent years, the B2B world has not been able to kick its affinity for using checks. AFP’s 2019 Electronic Payments Survey found that although check usage in B2B transactions has fallen to an all-time low of 42%, they remain the most popular payment method.

Checks have long been a tried-and-true B2B payment method mostly because finance teams know how to handle them and CFOs haven’t been eager to uproot legacy processes. But as working remotely continues to be the story of 2021 and as teams struggle to maintain business as usual, check usage will no doubt decline more sharply. The need to support a remote workforce is just the latest nail in the coffin for checks, with slower payment times, high manual effort, and substantial processing costs presenting their own issues.

Many teams have already made the leap to distance their organization from checks. AFP’s 2020 Payments Survey found that a third of respondents are already primarily using electronic payments for their B2B transactions and nearly 60% report being likely to convert most of their payments from checks to electronic payments.

3. Use of Smart Payments Will Grow in Efforts to Solve “The Remittance Problem”

With the elimination of checks from AR processes though, teams exchange one challenge for another. Electronic payments like ACH make it difficult for suppliers to apply payments to open receivables as remittance data travels separately. AR specialists have the arduous task of manually matching payments with the right invoice.

This is the main reason teams have been hesitant to increase their use of electronic payments, with finance professionals citing an absence of standard format for remittance information and a lack of integration with accounting systems—74% and 71% respectively—as their main barriers.

As the need for contactless and remote payments intensified over the past year, so have efforts to solve “the remittance problem.” One way finance leaders will increase acceptance of digital payments without creating more work for their teams is by utilizing “smart payments.”

“Smart payments carry business information so that as systems transact with each other, there’s data flowing along with the money,” says Craig. “The ideal outcome is for these systems to work in coordination, applying cash in the right places and closing the correct invoices, replacing much of the manual work AP and AR teams do today.”

As B2B customers have grown more comfortable with digital environments due to the pandemic, adoption of smart payment methods will be much easier to incentivize.

4. Businesses Will Embrace Collaborative Commerce

Beyond simplifying AR processes for teams internally, better availability of payment data can do wonders for reducing friction in how B2B buyers and suppliers transact with one another.

In 2021, forward-thinking banks, card networks and providers, and software vendors will be working to create a better payment ecosystem that addresses longstanding hiccups in B2B payment processes.

This is the idea of collaborative commerce, where companies do business together through their connected systems, allowing for more automation in the order-to-cash process and reducing time spent facilitating both sides of a transaction.

The concept of collaborative commerce is in its early stages but quickly gaining momentum as businesses collectively realize how friction in payment processes hurts their bottom line and payment innovators see solving this as a priority.

Back in October of 2020, in conversation with PYMNTS.com, Visa’s Head of Global Business Solutions, Kevin Phalen stated that in 2021, collaborative commerce would be “a reality moving into a maturity,” citing increased connectivity, standardization for the way data is moved, transparency, and ease of collaboration between buyers and suppliers as core focus areas.

5. Support for Flexible and Emerging Payment Options Will Increase

Another key B2B payment trend in 2021 will be increased support for flexible payment options.

A study of small businesses found that offering multiple payment options helped businesses increase their revenue by nearly 30%, and those that accepted four or more payment options brought in seven times more annual revenue than those who offered fewer options.

B2B companies are becoming more sensitive to this, with support for emerging payment methods like virtual cards and mobile payments like Apple Pay increasing. Greater options for B2B buyers create richer customer experiences and help suppliers get cash in faster.

For B2B finance teams, 2021 will be the year for adapting to changing buyer expectations and creating the systems needed to support payments and processes digitally. Although this year will be much like the last in its unpredictability, you can take comfort in knowing that going digital is a future-proof strategy. The one thing you can’t afford to do is continue to put off digitization, hurting both your customers and your business.

Why Your AR Processes Might Be Stuck in the 80s—and What It’s Doing to Your Cash Flow

The 1980s were a decade that defined technological advancement.

During this time, the world was introduced to the Walkman, VHS tapes, and VCRs. (And Beta tapes! Remember Beta?) These devices quickly changed the way people consumed media, from music to movies. Since then, however, continued improvements in technology have rendered most, if not all, of these devices obsolete.

Instead of purchasing physical copies of music and movies, we consume these things on demand through streaming services like Spotify and Netflix. And now with email and communication tools like Slack, once ubiquitous tech like fax machines are a distant memory for most of us—that is for those of us who even know what they are.

Like technology, much has changed in the world of finance thanks to developments in software and improved methods of payment acceptance. Yet with all these advancements, many finance departments in B2B today still rely on the use of dated accounts receivable (AR) processes in their day-to-day activities.

In this blog, we’ll discuss how AR processes for many finance teams today are stuck in the ‘80s, and what effect this has on companies’ cash flow and customer experience. We’ll also offer advice for how you can transform your AR processes by leveraging automation and online collaboration to help bring your finance team into the future.

Does all our mention of Walkmans and VHS tapes have you feeling wistful for a simpler time? Revel in the 80s nostalgia with our newly released Versapay video game, “Payment Runner” here!

Managing AR Processes in the 1980s

If we were to travel back in time to the 1980s, what would the AR process look like? For starters, we would see lots of checks. Checks dominated the 1980s and much of the 20th century as the preferred form of payment for B2B suppliers and their customers. In 1989 alone, over 18 billion commercial checks were collected by the U.S. Federal Reserve, over four times more than the 4 billion collected in 2019.

Accounting for all these checks required significant manual labor from finance teams—not only in processing them, but also in scanning and printing copies to file them away for future reference. Accounting clerks were also responsible for manually matching check payments to their corresponding invoices.

You would think that we’ve come a long way since then, but many businesses still receive checks from their customers, with some even preferring them to modern alternatives.

A study by PYMNTS.COM found that checks remain the most popular payment method among businesses, with as much as 81% of surveyed respondents using checks to pay their suppliers. And although only 51% of these firms are satisfied with their use of checks, they remain the first choice over automated clearing house (ACH) (49%), credit cards (34%), and cash (30%). But checks do not have to be the only way!

The Negative Impact of Manual and Dated AR Processes on Cash Flow and Customer Experience

The U.S. Federal Reserve approximates that the total cost of processing paper checks and invoices exceeds $150 Billion annually. The direct cost of processing a single invoice is estimated to be $17 USD. Multiply this by hundreds or thousands of invoices per month, and this total works out to be a significant amount against the business.

With manual AR processes, you’re not just paying with your dollars—you’re paying with your time. Comdata estimates the average processing time of one invoice to be ten days, which can increase the time it takes suppliers to receive their cash by as much as 30 days—even for the simplest of charges. Extending the order-to-cash cycle in this way means you wait unnecessarily long for the funds to reach your account, hurting cash flow.

Another often overlooked but highly important concern with manual AR processes is the impact they can have on the customer experience (CX) you provide. Customers want easy access to their account history. They want visibility into their account status, disputes, discounts available, and credits. They don’t want to have to call your team any time they have a question. They want a modern customer payment experience.

With manual AR processes, you also lack important visibility into your customers’ activities and account status. This inhibits your ability to form insights from customers’ payment behavior that could help you engage with them in better ways.

How to Transform Your AR Process

The first step you can take to eliminating manual work and paper from your AR processes lies in automation. Beyond basic process automation that can simplify manual tasks, the key to truly bringing accounts receivable processes into the future is to eliminate the need for many of those tasks—like dispute resolution and matching payments—altogether.

You can do this by bringing all your AR efforts online and in one central location that allows you to collaborate directly with your customers. By empowering customers to communicate with you more closely—say, to raise an issue on a particular invoice line item—you can solve issues before they become disputes.

Providing your customers with an online portal to manage their invoices and pay you eliminates much of the work finance teams would do to match payments with their appropriate remittance information. With an online payment portal, you can require customers to provide information on what they’re paying and give a reason if they’re making a short payment, which makes cash application effortless.

When comparing solutions, keep in mind that the right tool should help your business achieve these four things:

1. Save Time

Your AR automation tool should be equipped to send payment reminders, invoices, and notices of overdue invoices to customers automatically and according to rules you create. This will eliminate the need for your staff to make phone calls or send emails to your customers when managing collections, which will support in maintaining strong relationships with them.

2. Improve the Flow of Information

When customers have to go through you to access their account information or make payments, this creates delays—especially if you’re fielding all your customers’ inquiries through phone or email. When you have an AR solution in place that has a dedicated portal for your customers, you can let them serve themselves, taking a lot of strain off your team. When customers make payments directly through this portal, you’re also able to collect remittance information at the time of payment, saving you time in matching payments with open AR as this happens automatically.

3. Prioritize Workflows

Without an AR automation solution, it can be difficult for your team to know exactly what their priorities should be. But with AR automation, the mundane tasks take care of themselves, so your team can focus on the important tasks that require more immediate attention.

4. Gain Greater Visibility and Transparency Into Customer Accounts

Relying on manual data entry and exports for your AR processes means any customer data you pull is likely out of date before you’ve even shared it. AR software can give you real-time access and visibility into important data.

As the world continues to become more digital, don’t get left behind with your manual efforts. Take advantage of any opportunity to get paid faster and improve processes, giving your business the competitive advantage it needs to succeed in today’s uncertain economy.