3 Challenges Threatening B2B Cash Application and How to Overcome Them

B2B cash application refers to the process of matching a customer’s payments to the invoice that corresponds with them. In today’s economy, it’s a major yet incredibly challenging task for suppliers. Though technology has come a long way in terms of digital payments and automation, many accounts receivable teams continue struggling with cash flow inefficiencies.

A recent study suggests that almost half of all B2B invoices throughout North America are overdue, and debts like these affect an average of 6% of credit sales. As such, streamlined cash application processes have become an urgent need.

Let’s take a look at three of the main challenges suppliers face when accelerating B2B cash application, as well as strategies to address them.

1 Proliferation of A/P Portals Increases Manual Workload

More large buyers have adopted accounts payable portals in an effort to enhance their payment processes. This sort of shift tends to burden a supplier’s accounts receivable teams, though, as they have to manually log into several portals to retrieve the data they need. Not only is it time-consuming, but it also increases the risk of making mistakes along the way.

One report found that payment settlement speed, real-time visibility into payment transactions, and ERP integration of payment data are among the main gaps in modern B2B payment strategies. These issues often develop in fragmented systems, like those with numerous customer portals.

Solution: Implementing modern payment networks can reduce this burden by connecting suppliers to various platforms, banks, and ERPs. This move aims to reduce manual processes, prevent costly errors, and enhance company efficiency.

2 Electronic Payments Often Come with Decoupled Remittances

Initially, electronic payments were supposed to stream like B2B transactions, but at times, they arrive without any remittance information, which is also called a “decoupled remittance.” This sort of separation stalls the B2B cash application process, as accounts receivable teams struggle to locate remittance details to reconcile payments.

The McKinsey Global Payments Report highlights this “Decoupled Era.” In it, instant payments are incredibly common, but associated data is lacking.

Solution: Adopting digital lockbox technology can aggregate remittance data from various sources, including checks, ACH, wire transfers, and credit cards. It then standardizes the data for seamless cash application. This automation tactic makes it easier for accounts receivable teams to match payments to their invoices, even amidst common decoupling.

3 Manual Cash Application Processes Hinder Efficiency

Plenty of A/R teams rely on manual processes to apply B2B cash applications, which involves the tedious chore of entering remittance data into ERPs. As mentioned, manual entry takes far more time than needed and is prone to errors, and attempting to address these issues diverts resources from the initiatives needed for business growth.

On top of that, more complex customer invoicing structures can make onboarding new accounts receivable team members incredibly challenging.

Solution: Automation in invoice delivery and remittance collection can significantly enhance cash application efficiency. Technologies like AI-powered digital lockboxes and integrated payment networks allow accounts receivable teams to process payments as quickly as possible, regardless of the payment method.

Speeding up B2B cash application

Addressing and enhancing cash application is essential for maintaining financial health and gaining a competitive edge. By addressing the challenges that come with accounts receivable portal proliferation, decoupled remittance, and manual processes through automation, suppliers can quite easily enhance their operations.

Over 80% of businesses that don’t currently use automated solutions are at least interested in adopting them, a study by Datos Insight found.

A/R pros at businesses like manufacturers, medical equipment suppliers and logistics firms need to be able to fast-track B2B cash applications. 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 B2B cash application processes and payments processes and digital lockboxes.

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