B2B payments have a mail float problem — and they suffer from portal fatigue, too.
In an interview with Karen Webster, Billtrust CEO Flint Lane said that digital lockboxes can automate the processing of payments and invoicing — cutting down the labor-intensive tasks that were once tolerable before the pandemic, but have always stood as barriers to reconciliation and cash flow visibility.
“Businesses have always struggled with B2B payments, especially in the United States where more than half the payments are still done through paper check,” Lane said.
Checks and (Outstanding) Balances
Part of the issue is that the U.S. Postal Service has, in effect, made those inefficiencies attractive from a cost perspective.
Consider the fact that, as Lane said, it costs about 50 cents to mail a check anywhere in the country — from New Jersey to Hawaii. In the days before the great digital shift, before the urgency of recent economic turmoil, the three-to-five-day lag as a check traveled its route was simply part of the cost of doing business.
Low interest rates and a low “time value” of money made businesses a bit complacent.
Automated clearing house (ACH) payments? Well, they’re no panacea. The person sending that payment must call everyone up and ask for bank account and routing data, he said.
With checks or ACH payments, said Lane, “You get a couple of those a month, it’s no big deal. You get 10,000 of those a month, then you wind up paying employees to ‘sit’ on top of an inbox to process all of those payments.”
Credit card payments come with their own costs — tied chiefly to interchange fees. Lane noted, too, that virtual cards hinge on supplier acceptance and are marked by friction-filled hurdles.
As Lane said, “These virtual cards are delivered to businesses via email. They’re often delivered as an instruction — I’ve paid you with this card, but I don’t want to send it in an email, please log into this website to get the full card number and get the remittance data. Or maybe it’s an attachment that points them to that site.”
A supplier who gets 5,000 of those emails a month starts to suffer from portal fatigue. Processing payments — and taking payments — thus becomes an expensive and time-consuming ordeal.
But according to PYMNTS’ research, about 71% of chief financial officers (CFOs) say their organization has accelerated payments digitization efforts since March 2020, with 38% doing so to improve their balance sheets. The fact remains that staffers may not be in the office to process those payments, and we’ve seen all manner of delays with mail delivery.
However, these common problems are giving a chance for firms making and receiving payments to find common ground — and a solution that isn’t the proverbial check in the mail, Lane said.
Digital lockboxes can do away with that mail float, he said. We’re well beyond the days when armored cars picked up cash, when cash went to the bank. The service provider offering the check lockbox has been well-established within financial services, and the digital lockbox is just one more step in that B2B evolution.
Lockboxes Go Digital
The lockbox (as offered by Billtrust) captures all the information that runs alongside and within transactions, logs into the websites, and makes sure that cards qualify at the best possible rates.
The boxes match up ACH payments with the ACH remittance details and supply them back to the business in a single file that enterprise resource planning (ERP) systems can digest. The cloud-based platform also takes the onus off companies’ having to build their own accounts receivable (AR) systems.
“Any business at scale will need a digital lockbox even if they don’t quite know it,” Lane said.
He added that the firm has more than 25 of those providers on its business payments network, sending the transactions to the digital lockboxes (which also link directly with supplier portals). One positive ripple effect is that cash flow visibility improves.
“We can tell our customers when they’re going to get paid — and when payments are scheduled,” Lane said. “So, there’s a lot of intelligence built into those robotic processes.”
Scale matters, and earlier this month, Billtrust said that it had made its second European acquisition in four months, having bought Netherlands-based B2B financial software platform Order2Cash. That comes on the heels of the late 2021 acquisition of iController. The two deals are part of a long-term to grow through acquisition.
Read more: Billtrust Acquires European B2B Financial Software Provider Order2Cash
Lane noted that the Order2Cash deal helps broaden global reach and cement presence in the European market as Billtrust and Order2Cash both focus on automating invoicing and payments, and have some shared customers in common.
As Lane told Webster, post-acquisition, “They are handling the European business, while we are handling the U.S. business.”
Looking ahead, he said, B2B payments need even more simplicity and certainty.
“All a supplier should know is that the digital payments should be streamlined, and the rules can be enforced,” he said. “And the byproduct is that ‘paper check’ enterprises will move to digital. Getting paid faster, with fewer exceptions and less labor, represents a win all around.”
See also: Billtrust Enhances Collections Capabilities With $58M iController Buy
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