3 challenges threatening B2B cash application and how to overcome them

Since the pandemic began in 2020, B2B cash application – the process of matching a payment from a customer to the corresponding invoice being paid – has been slow and inconsistent at times for many supplier companies.

Part of it is caused by supply chain issues, part of it’s due to a remote workforce, and sometimes it’s due to mail delays.

On top of it, buyers are taking even longer to pay their suppliers. Research from Hackett Group found that large U.S. companies took 58 days on average to pay suppliers during the early quarters of fiscal year 2021 vs. 55 days from the same period in 2020. So it’s become even more difficult to settle transactions and recognize revenue.

Here are three top challenges suppliers are having to overcome to speed up B2B cash application and how they can be managed.

1. The rise of A/P portal usage by large payers

While the increased adoption of personalized accounts payable portals – especially among large buyers – is a positive sign of B2B digital transformation, the truth is it’s also making more work for accounts receivable teams.

For buyers, adopting vendor portal platforms makes their lives easier, but it creates more manual processes for their suppliers. This is because these platforms require A/R teams to manually log in to retrieve remittance data – a time-consuming activity, especially when dealing with large payment volumes.

In fact, in a recent study commissioned by Billtrust, over 350 senior accounting and finance leaders reported “dealing with increasing numbers of customer portals” (38%) as a top concern. This is unsurprising considering the same report also found that the majority of A/R teams now interact with an average of 11 to 20 different A/P portals, which can lead to confusion.

The reality, however, is that A/R teams will have to deal more frequently with these A/P portals going forward, which is why they need to find a way to reduce the need for unnecessary manual processes and go all-in on automation and digitization.

Modern payments networks, for example, connect suppliers to most, if not all, of the different A/P platforms that buyers use to pay, as well as third-party banks and ERPs.

2. Electronic payments with decoupled remittances

The emergence of electronic payments once seemed like the solution for the traditional pains of B2B cash application. After all, electronic payment data doesn’t need to be keyed, eliminating labor costs and mistakes associated with converting paper remittance data to electronic data.

Electronic payments, however, often don’t travel with electronic remittances. Rather, e-payments are now most often made with “decoupled remittances,” or remittances that arrive separately. This means that the remittance advice A/R teams need to reconcile payments is also arriving later and separately, slowing things down and adding to workloads.

Despite the expectation that electronic payments would streamline the B2B cash application process, in many respects, the opposite has happened. Inefficiencies are still burdening A/R teams with tedious tasks that require more staff and additional costs.

Automation like “digital lockbox” technology can help them address this issue by taking remittance data from different sources across checks, ACH, direct debit, wire and credit cards and standardizing it for easy cash application. This means that even as payers continue to send decoupled remittances, suppliers can leverage AI to automatically match them to their appropriate payments.

3. Manual B2B cash application

A/R teams are used to the painstaking task of manually processing hundreds of remits and typing remittance data into ERPs. But this tedious and error-prone process is taking their time away from more strategic tasks that can drive business growth.

In addition, the nuances of each customer’s invoicing structure can make it difficult for A/R to onboard new hires, which further slows down B2B cash application and your A/R pros’ ability to seamlessly do their jobs.

Speeding up B2B cash application

These inefficiencies can have a significant negative impact on an organization’s financial health, particularly in today’s environment where a business’s ability to accelerate cash flow from sales has become especially mission-critical.

A/R pros at businesses like manufacturers, medical equipment suppliers and logistics firms need to be able to fast-track B2B cash application. It’s imperative not only for their own organizations’ resilience, but for the economy as a whole.

In response, A/R teams have had to supercharge many of their job functions. For instance, many have begun automating invoice delivery and remittance collection, which is making it far easier for them to apply cash, no matter how a payment is received. It’s essentially accelerating digital payments by connecting with buyers where they do business.

Much-welcomed predictability can be injected into the financial health of your business by embracing digitization and automating payments processes with B2B payments networks and digital lockboxes.

This technology may be key for lightening the load for your A/R team going forward.