A perfect storm of market shifts catalyzed by the global pandemic has forever changed the B2B payments landscape.
Billtrust CEO and Founder Flint Lane highlighted three shifts in particular that are igniting major change in the industry: first, the accelerated digitization of accounts receivable (AR) and accounts payable (AP). Second, AR professionals working from home could no longer run credit cards from their desks or accept paper checks in the mail. And third, a further slowdown of the postal system added even greater friction to the paper check, leading to longer days sales outstanding (DSO).
At the broader level, organizations began to fully understand the biggest pain points of their B2B payments workflows — and today, as Lane recently told PYMNTS’ Karen Webster, they’re also beginning to understand how to fix them.
“It’s fun to see the world waking up to this opportunity,” he said. “The companies that are helping the world figure that out should receive outsized returns because of that.”
For Billtrust, the current market climate presented an opportune moment to go public and further the B2B payments education of the business community.
Fostering Education
Organizations have known for a long time that their paper-based, manual B2B payments workflows were far from ideal. But optimization involves more than just ditching paper.
“The industry thinks, if we can just get this payment on ACH or card, the problem goes away,” reflected Lane. “And that’s just not true.”
With ACH, the biggest challenge often comes in the form of remittance data being emailed separately from the movement of funds. For businesses managing tens of thousands of transactions every month, manually sifting through email inboxes to match remittance data with bank account information is a massive point of friction.
Cards, meanwhile, carry the burden of interchange fees, often leading buyers and suppliers to negotiate lower rates, thus forcing greater expenses on the vendor.
As businesses’ awareness of these challenges grows, more organizations are looking to not only migrate away from paper, but to also develop B2B payment strategies that include integrated payments for more seamless reconciliation within the ERP, while finding payment methods that work for both the buyer and supplier.
For Billtrust, that meant the creation of a digital lockbox to consolidate the collection and integration of reconciliation data, as well as the development of its Business Payments Network, which allows firms to efficiently view their business partners’ preferred ways to pay and get paid.
But further education is needed, said Lane.
“When we explain it, we see the light bulbs go off, but there is not a lot of market awareness about a digital lockbox, so we have to educate people on that,” he said.
Going Public
Billtrust recently had its own education process, culminating in a merger agreement with special purpose acquisition company (SPAC) South Mountain Merger Corporation in order for Billtrust to go public at an estimated $1.3 billion valuation.
The arrangement makes Billtrust the latest company to take the SPAC route to going public, but Lane admitted that he wasn’t initially convinced of this strategy. “We’ve become educated,” he said. “There are significant advantages in terms of timing, certainty and the amount of money you can raise.”
He now describes the traditional initial public offering (IPO) as the “legacy way” of going public, noting the efficiency of utilizing a SPAC in combination with an additional commitment of $200 million in the pipeline. But Lane noted that going public, while an important milestone, is “just a step along the path to our goal.”
As Billtrust and South Mountain Merger Corporation prepare to close the transaction in early 2021, there will be more light to shed on the opportunities of B2B payments optimization for existing and potential new customers. As such, the goal for Billtrust will be to “focus on outcomes,” said Lane, adding that this tactic leads to customer growth and, thus, higher payments volume and further sales opportunities.
How that strategy manifests will look different for each customer, however. That’s because when it comes to the “perfect” B2B payment, there’s no such thing.
The definition of a tolerable interchange rate varies by the size and business model of the vendor. A real-time transaction may be more predictable, but it doesn’t address the issues of cost and interoperability, said Lane. And one buyer-supplier relationship may benefit from the familiarity of ACH more than another.
Giving businesses choice and visibility, and enabling the integration of transactions within back-office portals like the ERP, is a solid place to start for buyers and suppliers aiming to find their own “perfect payment.”
“What a lot of people miss is when you’re a large supplier, customers come in all shapes and sizes,” Lane added. “Not everybody is going to do things the same way. You need to give your buyer a customer’s choice.”