When it comes to digital technology, business-to-business (B2B) payments are well-known latecomers to the party, with advances in consumer payments far outpacing those of their business counterparts. The lack of modern B2B payments technology is perhaps nowhere more obvious or at odds than in the technology industry itself.
Nearly two-thirds of technology B2B buyers regret almost every purchase they make, up 6% from 2020, and the challenges of purchasing are a large part of the reason. Frustrating, legacy buying experiences, suboptimal communication and a surfeit of choices make up the daily routines of technology buyers, resulting in longer buying cycles when investing in expansion. On the receiving end, tech companies have some of the biggest problems with late invoice payments.
With technology investments proving relatively inflation-resistant this year, the industry could see strong competitive and revenue gains on both sides of the equation from investing in the B2B buying and payment experience.
Many companies in the technology and software industries are encumbered by slow payments. A recent study found that out of all industries, IT businesses wait the longest to get paid. Eighty-one percent of these businesses receive late payments, 31% of which arrive more than 30 days past due.
This payment tardiness is not for lack of effort on their part, as IT businesses are among those spending the most hours per week on accounts receivable (AR) management. Nearly one-third of IT companies spend upward of seven hours each week managing AR, and computer software is the industry most likely to struggle to keep on top of these tasks. This struggle has important implications for the tech industry, as data indicates that more thorough invoice follow-up is directly correlated with earlier payment.
Late payments, in fact, may now be a greater problem than ever before: There has been a 209% increase in late payments since the pandemic’s onset in 2020, with almost nine in every 10 businesses typically paying past their invoice due dates. Fully half of businesses spend upward of four hours per week chasing receivables.
A look at the purchasing side offers a partial explanation for low payments. Businesses are growing their tech stacks for B2B purchasing as they attempt to keep pace with digital transformation, yet nearly eight in 10 businesses face challenges when purchasing B2B software and services.
A slow purchasing process is the top reported challenge, at 34%, but issues do not end there, as approvals of B2B payments are quite problematic as well. Nearly half of United States-based B2B accounting professionals say their companies require six or more approvals for a new software or vendor purchase, and nearly one-third say it takes upward of three weeks to receive approval. Moreover, nearly three-quarters of accounts payable (AP) teams struggle to match orders with invoices.
The upshot is clear: Nearly 71% of U.S.-based B2B accounting professionals believe their purchasing processes for B2B software and services should be automated. Indeed, 87% favor an all-in-one software solution to manage the process from purchase requests through payment to vendors.
Encouragingly, businesses using AR software have been found to be three times as likely to have their invoices paid before the due date as non-users, so computer software and IT companies can benefit greatly by implementing these solutions.
The industry also stands to benefit uniquely as both users and developers of such technology. Although the global tech industry shows signs of slowing, the one segment that continues to perform strongly is B2B SaaS. A recent survey of more than 100 B2B SaaS companies found that while the SaaS industry is growing at about 17% per year, B2B companies within that segment are growing at more than 10 times that rate, with revenue rising by 179% in 2022 due to high demand. B2B SaaS solutions offer high value to business customers by using data and analytics to improve products and services. Tech companies need to look no further than their own industry to help themselves, as well as their clients improve the B2B payment experience.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More