Digital Payments Help Small Businesses Solve Back-Office Disconnects

Business payments are growing more digital by the day. But with that growth comes the critical importance of maintaining back-office structure. That means connecting several “sides” of the B2B payment and managing layers of interaction between a company’s external and internal activities to achieve scale.

The urgency is there, as statistics show that 82% of smaller firms fail due to cash-flow problems. Not surprisingly, COVID has been a major accelerator of digitization, and it’s also forced companies to look inward at the major pain points within their organizations.

Aditya Mishra, director of product management at Plastiq, told PYMNTS that many companies have already pivoted B2C payments fully into the digital age. But currently, cracks in companies’ back-end processes are stymying cash flow, and thus firms’ ability to grow.

And they’ve been there a long time: “COVID just exposed those cracks,” Mishra explained – they were laid bare by the sudden decline in physical payments (done by plastic or by paper) and by supply-chain disruptions. “These events were resounding calls to arms, telling these companies that now’s the time to start thinking about [B2B payments] if they haven’t already.”

As a result, firms have had to examine how (and even if) they’d been tying together accounts receivable (AR) and payable (AP) processes, and whether those ties might be classified as being robust or fragile.

As Mishra said, “to scale, you need to not be fragile.”

Cash Flow Aspects 

There are two aspects of cash flow, said Mishra: visibility and connectivity. Few companies have managed to address both of those aspects successfully, he noted.

“We have to help businesses be more honest with themselves to see where they are in terms of the processes they have internally and the fact that cash flow in itself is [made up of] multiple layers. The payments layer is just one part of the entire stack,” he explained.

Other “layers” affecting cash flow range from data access to accounting to bookkeeping — and even inventory management. “And then on top of all of this, you’ve got your relationships that encompass the way you work with your vendors and customers,” said Mishra.

He likened cash flow to a dance that weaves between all of those layers. If an enterprise’s customers are taking 90 days to pay an invoice, then real-time payments won’t move the cash-flow needle. Improving the picture requires better connectivity between AP and AR.

The challenge then becomes how to fix it all – and in many cases, enterprises tend to attack pain points in a piecemeal fashion.

“‘My payments are slow. Let’s fix payments,’” Mishra said, illustrating the mindset. “Or, ‘my invoicing is broken. Maybe that’s what I need to fix.’” But with some education, he said, Plastiq’s customers soon understand that it’s better to take a more holistic approach.

Before the pandemic, instituting those fixes would take months or even quarters, said Mishra – but now, all-in-one platforms like Plastiq can help client firms move quickly to bring payments and a wealth of back-office functions online.

Looking ahead, Plastiq is focusing on broadening the acceptance of real-time payments and buy now, pay later (BNPL) in the B2B space. At first glance, though, the challenges facing a business with just 10 people but $5 million in annual revenue are inherently different than an enterprise that is processing 20,000 invoices monthly.

“The benefit of having a holistic solution is that we are able to solve the issues for the former firm as well as the latter,” Mishra said. “B2B has a lot of catching up to do – and the catchup has started.”