Intractable manual payment processing remains a significant pain point for many organizations, but the more companies experience automated payment processing, with the cost savings and valuable data it yields, the more they move to embrace it across the business.
For example, issuing banks are focused on expanding card programs and need better insights into transaction volumes and interchange details. Buying organizations need more information about transaction processing and to know if exception reporting is required. Suppliers accepting payments still wrangle with manual processing and data entry. Automation and straight-through processing (STP) are proving their value and growing these business-to-business (B2B) use cases.
“If you think about it from the supplier standpoint, the organizations receiving the payments are probably the most data-hungry and get the most value from data,” Zachary Lynn, head of revenue operations at Boost Payment Solutions, told PYMNTS.
“It’s not only from data they receive but also data that we remove from their environment,” he said. “The data they receive, like remittance data and the payments data that they can reconcile into their AR [accounts receivable] software, is extremely valuable to help their operations. At the same time, removing certain data from their environment makes them more operationally efficient.”
Lynn explained that Boost sees the benefits of STP on accounts receivable as a five-legged stool of pricing, automation, reporting, timing and security. Needs vary for companies at different lifecycle stages, but Lynn said that over time, automation and reporting deliver unique value.
When the mission is reducing days sales outstanding (DSO), as it often is, companies begin to see the payoff in moving from manual to automated processing quickly. As organizations move to completely automate receivables, “they’re going to start seeing benefits associated with cost reduction outside of just the individual transaction pricing,” he said.
“Individual transaction pricing, again, can be from things like interchange optimization, of being able to make sure that the correct data is being passed to reduce interchange for some of the acceptance costs,” he said. “That can be very valuable in looking at the individual transaction.”
Giving some examples, Lynn pointed to one Boost client that sells medical equipment to hospitals and different types of healthcare providers. This firm deals with “hundreds if not thousands of buying organizations,” he said, yet it relies on an enterprise resource planning (ERP) system that is unable to support Level 3 Processing allowing B2B companies to achieve lower interchange rates.
“What that really means is there are certain data elements that can be passed that can reduce the transaction costs associated with receiving card payments,” he said. “We initially began working with them to help them with the optimization of transaction pricing. We’ve gotten to the point now where we’re processing hundreds of millions of dollars on their behalf, and they’ve recognized significant benefits associated with it.”
This has transformed AR for that client to the point where discussions have moved away from the cost of receivables to further automating and extending this benefit to the entire organization using Boost’s STP capabilities.
On the supplier enablement side, he said, “Oftentimes the suppliers are already receiving digital card payments or single-use or virtual card payments. When we talk to them, I would say 9 out of 10 times the pain points they’re talking about are related to the manual processing and data entry associated with these different payments.”
In that case and others like it, Boost takes on the entire payments workflow.
“We pull all of that manual work out of their organization, do it on their behalf, and give them more data and more seamless operational benefits than they’d have, even if they were moving to a non-card type of payment,” he said.
As virtual card use for B2B payments rises, so does the data and reporting burden that’s associated with it. Here again, specialized partners can take up elements of the heavy lifting and free the organization to redeploy assets that would otherwise be reconciling payments.
Using the example of a telecom provider, Lynn said, “You have hundreds if not thousands of account numbers associated with one payment, the data associated with that reconciliation can become a nightmare.”
Using an STP solution, “They can outsource the payment processing as well as set the parameters for the type of data they’re going to require back, in the data format they require, that can tie that payment back to those hundreds and thousands of different account numbers associated with that particular payment,” he said.
Another example could be a manufacturing firm with a $20 million raw materials purchase comprised of perhaps 200 individual invoices.
“In this case, it’s not the account number, it’s going to be an invoice number,” Lynn said.
“Again, the data issues associated with reconciling a payment back to the selling organization can be extremely painful,” he added. “Some stats we like to talk about is that 46% of businesses have reported receiving unusable remittance information.”
That kind of issue is disappearing as more B2B companies move to automated STP of AR and accounts payable (AP), which corrals these data issues and lightens the internal workload.
Citing industry stats that 42% of businesses find invoice reconciliation a challenge and 68% of B2B vendors believe customer data management will drive growth for their business, Lynn said: “As the industry evolves, as we see more and more electronic payments going out, that more organizations will benefit from enhanced data, from being able to automate their … accounts receivable systems.”
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