How The Supplier Guides The Accounts Payable Evolution

In a pre-COVID environment, accounts payable (AP) departments had three major struggles, according to Nasser Chanda, CEO of Paymerang.

The first was overcoming the burden of manual processes, from invoice ingestion and approval to payment initiation and reconciliation. The second was ensuring that payments to suppliers were made timely and accurately, and the third was B2B payments fraud.

Today, Chanda told PYMNTS in a recent interview, those challenges are largely the same – only amplified in a market marred by volatility as a result of the pandemic. As organizations’ AP departments move to overcome these elevated hurdles, automation technology and payment innovations will emerge as key tools to help them get where they want to go.

Yet unless AP departments and their technology providers consider the supplier in their innovations, organizations will not achieve the desired results in modernization, efficiency and security.

“I think that’s the future of business payments,” Chanda said of the opportunity to consider both buyer and supplier needs within AP departments. In the evolution from lockboxes to bank-sponsored electronic payments to single-payment-file capabilities, the next iteration of B2B payments will be synchronized workflows that move funds and data between B2B partners.

Fighting Fraud

In the midst of the COVID-19 crisis, fraud has blossomed to new heights, and AP departments haven’t been spared. It’s a pain point that hits both buyers and suppliers, whether invoices are forged or fraudulent payments are made. In any case, both the buyer and supplier are at risk of losing money and facing even greater inefficiencies in their workflows.

“Security has become even more important in terms of increased invoice and payment fraud, because now we’re all doing things by email,” explained Chanda.

Indeed, without the proper authorization checks, AP personnel are facing a growing risk of business email compromise (BEC) scams that dupe professionals through fake email addresses and impersonation tactics.

“There are two things in the AP world that support fraud. One is lots of email and not enough talking to each other, and the second is the urgency that has created of ‘let’s get this thing done right away,'” noted Chanda.

Integrated technologies that can automate invoice and payment authorization, while maintaining a secure electronic paper trail of transactions, are important for mitigating this threat.

Embracing The Payments Mix

Interestingly, according to Chanda, one of the most disruptive innovations in payments may actually heighten the risk of B2B payments fraud for buyers and suppliers, and that is real-time payments.

“I think real-time payments have a place in business payments, but not a broad place,” he said, pointing to contingency payment scenarios in which delivery and payment must occur at the same time as one of only a handful of use cases for AP technology.

Considering the importance of payment terms for buyers and suppliers, the extra 24 hours gained through real-time payments won’t actually add much value to either side of the transaction, Chanda noted. And worse, real-time payments may actually foster the aforementioned environment of haste that can cause security checks to break down or get glossed over, elevating the threat of fraud.

The value that real-time payments can bring to AP departments, however, is access to enhanced remittance data (which is especially important for suppliers, said Chanda), as well as expanding the number of choices both buyers and suppliers have to send and receive payment.

“Clients want vendors to be taken care of,” he said. “Some vendors have chosen to accept card so they get paid right away, some vendors prefer ACH and, believe it or not, some prefer check. So it’s important for us to offer all of those, and important to offer it with the remittance data that’s tied to the payment, so vendors can apply the cash accurately.”

The proliferation of payment rail innovation has introduced new ways to support the digitization of accounts payable departments and drive the efficiency gains demanded by AP teams and their CFOs. They’re also vital to ensuring that suppliers can get paid accurately and on time, while the technologies that can automate these transactions also have the potential to combat fraud through value-added features.

But to tackle these AP pain points, technologies that boost efficiency and security must also ensure that suppliers’ biggest concerns are addressed.

“A lot of AP service providers don’t think of the other side,” said Chanda. “If the supplier isn’t taken care of, the buyer suffers, so you have to service both sides if you want to work in this industry for the long term.”