The Evolution of the Old-School Accounts Payable Process
When was the last time you had a reason to think about your company’s regular expenses? It probably wasn’t recently, since they’re attached to your credit card, and every month, your company gets automatically invoiced and billed based on your subscription, or your usage. Whether it’s a CRM, project management system, or cloud storage, paying for it is straightforward, transparent, secure, and reliable. Payers have control, and most importantly, there isn’t any room for human error — the systems just work.
B2B transactions have been revolutionized and consumerized. While as an online consumer, you can use one-click checkout and Buy Now, Pay Later services, at work, payments to other businesses have gotten pretty slick too. Think corporate credit cards, B2B financing platforms, and the advent of fast online checkout portals. Yet, all the innovation in the world hasn’t overcome the unreliable way that companies pay their service providers.
For B2B service providers or suppliers, the elusive holy grail is the ability to get paid like software companies do — without any proactive steps on the buyer side. This means getting payment authorization, submitting payment instructions straight to a payment network, and simply getting paid, reliably and quickly.
Today, 47% of companies are paid late for their services. And the State of Small Business Payments 2020 survey found that 25% of small businesses had cash flow issues related to payment delays in the last year. But only 3% of late payments are caused by clients’ bad intentions. Here’s why the accounts payable process is so painfully slow and vendors keep getting paid late.
Vendors go through a long cycle of manual work to research billables for invoices, look up contractual terms, generate invoices, and send them out. At the end of that cycle, the client has to go through as many steps (in fact, more) to remove the risk from paying their vendor.
Here’s how that looks:
First, clients go back to the original email you sent them as the vendor, checking the terms you agreed on, making sure they match the agreement terms to the invoice terms (such as billing date, % upfront, and more). Then there’s verifying the calculations on the invoices, checking where it was sent from, for fraud, and making sure they haven’t paid this invoice before, since 1 in 20 invoices are accidentally paid twice.
Clients usually don’t really have the bandwidth to do this process and if there’s anything that comes up that doesn’t match what they think they agreed on, it just goes on the ‘to do’ task list and doesn’t make the top priority cut. The closer and the better the relationship is, the more clients will feel comfortable doing this because the vendor knows they’re “good for it and will for sure pay later!” In bigger companies, there are even more steps and people involved.
Nobody’s happy:
For vendors, late payments threaten the survival of their business. And buyers want to pay effortlessly. They are dissatisfied with the slow, manual, accounts payable process — according to Forbes, B2B buyers are beginning to expect that their purchases be transacted with the ease and convenience of an Uber transaction. B2C payments often require less than a minute to complete, while B2B payments take countless hours. This isn’t working for anyone anymore.
Companies are used to moving software payments into the expenses line and not processing them through accounts payable. After all, there is no reason to waste AP resources on making sure software invoices are valid, accurate, or not a duplication. The same evolution needs to happen for B2B services.
Here’s how to solve it:
The complete way to solve this problem involves both sides of the transaction, and this is what we’ve built at Anchor. Thankfully, it doesn’t involve a patchwork of workarounds or spreadsheets. The key is to take away any opportunity for human error in the billing cycle, from start to finish. From the proposal to the services agreement, payment terms, all the way through to invoicing, payment and reconciliation — making all the information and data sync up in real-time. Anchor has taken the necessary step of securing the client’s side of the transaction with AI, full transparency, updates, and additional controls.
Only a fully autonomous billing cycle would provide the level of confidence that clients require to combat fraud, prevent duplicate payments, errors, and finally remove any objection to releasing payment immediately, and fully effortlessly — which is the holy grail for B2B service providers, and a game-changer for their clients.