Into the Nitty-Gritty: How, Why, and Where Automation Optimizes B2B Payments

What many finance teams want for the holidays this year is an automated back office.

As the calendar years’ worth of PYMNTS Intelligence studies have shown, accounts payable (AP) and accounts receivable (AR) automation are increasingly becoming key areas of focus for businesses looking to eliminate manual B2B processes and corral their disorganized tech stacks.

AP and AR automation tools are helping organizations streamline workflows, improve cash flow, and reduce costs. But what are the actual business processes being impacted by AP and AR automation, and how does each individual step compare to traditional methods?

The short answer is, it depends; and the long answer is, it’s complex. The B2B payments landscape is a sophisticated one where one size never fits all.

Yet as financial infrastructures become more digital and interconnected — and CFOs and treasurers demand real-time insights into working capital — automation is increasingly being eyed as a way to transform B2B business functions that have traditionally been a cost center into ones that can serve as a strategic enabler of growth.

The future of B2B payments lies in embracing digital innovations and automation technologies to unlock efficiency, security and scalability. This makes it crucial for business to understand just what they are looking to get out of AP or AR automation — and then going out and getting it.

Read more: OCR’s Key Role in Scaling Paperless Invoicing and AP/AR Automation

Transforming AP Processes from Invoice to Payment

PYMNTS Intelligence finds that businesses continue to struggle with AP systems that rely predominantly on inefficient, manual processes. 63% of CFOs say their companies’ AP functions have encountered delays. Invoice capture; approval workflows; payment scheduling; fraud detection and compliance; and reporting and reconciliations are all AP workflows that are being fundamentally reshaped by automation.

Invoice data entry, a key AP workflow, is traditionally manual, prone to errors and time-consuming. Automation helps eliminate this bottleneck compared to traditional methods in large part by using innovations such as optical character recognition (OCR) and machine learning (ML) to capture invoice data instantly, ensuring consistency and transparency while reducing processing times.

Manual routing of invoices for approvals often creates delays and lacks visibility. Automated workflows solve this by routing B2B invoices based on predefined rules, sending reminders to expedite approvals, and providing real-time tracking of progress. Missed discounts and late fees are also common with manual payment scheduling. Automation addresses this by prioritizing payments to capture early payment discounts, ensuring on-time payments to strengthen vendor relationships and integrating with treasury systems for optimal cash flow management.

Manual reconciliation is also infamously error-prone and labor-intensive. Automated systems streamline reconciliation processes, provide real-time dashboards for insights into spending trends and make month-end closing faster and more accurate.

Read more: ERP Innovations Are Rebooting the Back Office as Organizations Modernize

Speeding Up the Cash Flow Cycle by Optimizing AR Processes

PYMNTS Intelligence finds a lack of transparency around AR  workflows can lead to accounting teams operating in the dark, resulting in payment hurdles, inefficiencies and hidden costs that go unchecked.

Invoice generation, payment collection, customer communication, dispute management and reporting and analytics are all areas where AP automation can provide significant benefits compared to legacy methods.

Manually creating invoices can be inconsistent and time intensive. Automation works to ensure invoices are generated automatically, accurately reflecting real-time data from contracts and purchase orders. Traditional payment collection methods like checks are slow and delay cash inflows. Automation helps introduce multiple digital payment options, including virtual cards, which can reduce days sales outstanding (DSO) and accelerate cash flow.

At the same time, resolving invoice disputes traditionally involves time-consuming back-and-forth communication. Automated systems help to streamline this process with centralized workflows, faster resolutions and transparent tracking of dispute statuses compared to legacy methods.

Similarly, manually following up on overdue payments often leads to inefficiencies. Automation enables personalized reminders and notifications, enhancing customer experience and improving collection rates while maintaining a clear log of all interactions.

Automation also provides real-time insights into receivables, predictive analytics to forecast cash flow and detailed reports that support strategic decision-making.

With granular improvements across each step, businesses can remain competitive and thrive in today’s increasingly digital economy.