Digitize to Optimize-Part 1: A Three Part Look at B2B Payments Digitization – Financing Agility

By Robert Johnson | June 30, 2022
About Robert

“You are what you owe.”

This line, spoken by the character Big Chris in the movie Lock, Stock and Two Smoking Barrels (right before he…aggressively…demonstrated the consequences of not paying), is memorable for how its blunt truth is so applicable to businesses, individuals, municipalities, and other entities.

A reputation for timely, dependable payments is all about credibility, trustworthiness, respect, and especially viability.

Like contracts, cash inflows and outflows are the lifeblood of business. Payments are core to managing that financial fitness, and digital payments make that much more effective. In this three-part series we look behind the compelling stats and results presented in Corcentric’s report with PYMNTS.com, Business Payments Digitization: How Financial And Healthcare CFOs Build Healthier Balance Sheets. We’ll explore some of the key factors and objectives that are driving payments digitization adoption, especially in the financial services and healthcare sectors, and how bigger companies are leading the way.

As a side note, the report uses the term “transformation” liberally. That makes sense, since the CFOs surveyed listed payments transformation (not just automation) as a priority. But digital transformation is a big concept that can be difficult to quantify, so while you read think of transformation as the maturing of your B2B payments from manual to efficient, scalable, reliable, and on to agile.

Payments Digitization Drives Business Agility

As the saying goes, “The secret to success in life is to be ready when your opportunity comes.” It’s safe to say that businesses with anemic cash flow, lack of access to working capital, and a somewhat constricted balance sheet aren’t ready for any new opportunities. Obviously, the subtleties are different depending on your industry (the report highlights financial services and healthcare, but also includes manufacturing, retail and transportation) and business model, but the basic principles are the same.

The current digitized payments situation — Close to 60% of the CFOs surveyed in the PYMNTS.com report (across all five industries mentioned above) identify digitizing payments as extremely important to improving their balance sheets, along with achieving the other benefits of doing so. Impressive, but it also means 40% aren’t focusing on maturing their capabilities through payments digitization.

What that means — The companies who see the strategic importance of payments digitization are – among other things – positioning themselves to be nimbler in seizing or creating opportunities for increased growth and/or profitability. Digitized payments help to unlock working capital, which is another reason it’s a priority for 46% to 59% of CFOs in the report. That access to working capital provides both a comfortable cushion in volatile times, as well as leverage when opportunities arise. Larger companies are leading this adoption, as they have the most to gain, but the benefits of digitizing payments are just as applicable to mid-market and medium companies.

The pandemic accelerator — Business disruption often sparks a strategic rethink at companies, especially over in the finance department where CFOs and teams start looking for ways to streamline and economize without creating friction in the business. Two years’ worth of pandemic uncertainty hastened these efforts, driving companies to seek more ways to improve their management of costs and cash flows. Payments digitization seemed to be their focus of choice, especially at financial and healthcare companies, where 84% of CFOs cited the digitization of payment processes as a key to effectively unlocking working capital and funding their own agility.

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Beyond Digitized Payments: The Other Side of the Agility Balance

As mentioned above, establishing a holistic approach to cash inflows and outflows means eliminating silos between accounts receivable (AR) and accounts payable (AP). Not surprisingly, this objective is also highly ranked among CFOs in the survey. For starters, having real-time insight into both cash inflows and outflows provides the required liquidity visibility necessary to any spending strategy, and feeds data analytics to better manage risk, improve business processes, and align the company’s asset investment efforts to improve balance sheet health.

Just as importantly, real-time cash insights empower agile decision making that enables business leaders to adjust quickly to market changes, supply chain realities, and growth opportunities.

The Payments Digitization Upshot

There’s an axiom that applies here: The time to fix the leaking roof is when the sun is shining. That means, before the next period/wave/sudden bout of business disruption hits – and it will hit – it pays to follow the lead of the big company CFOs cited in the PYMNTS.com report who have fully embraced the move to digitizing payments.

Remember, digitization is about the business outcomes, not the transition process itself.

This will put your organization on a more agile footing with better balance sheet health, more holistic oversight of accounts receivable (AR) and accounts payable (AP), and control over your cash flow management. An improved reputation for timely, dependable payments will also boost supplier relationships, a critical advantage in times of supply chain and business volatility. And it may keep Big Chris from paying a visit.

Download your copy of Business Payments Digitization: How Financial And Healthcare CFOs Build Healthier Balance Sheets from PYMNTS.com and Corcentric. Then keep an eye out for parts two and three of this series, Digitize to Optimize: A Three-Part Look at Payments Maturity. We’ll explore how survey respondents are using payments digitization as a risk management and payments fraud-fighting strategy, as well as an effective relationship management tool.

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