Digitize to Optimize-Part 3: A Three Part Look at B2B Payments Digitization – Relationship Management

By Robert Johnson | August 2, 2022
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Q: When was the last time you filled out a check and mailed it in with the tear-off stub from a statement to pay a bill?

A: What’s a check?

If you’re young enough, that’s not really a joke. In fact, you may have never signed a check, much less stuck it in an envelope with a “return this portion with your payment” part of a bill. Heck, you may not even remember getting paper statements in the mail.

(Half) joking aside, the point is — why do so many businesses still cling to antiquated B2B payment methods when, as consumers, the people who work in those businesses have embraced digital payments / mobile / eWallets / NFC / etc. for years? (That’s 82% of Americans, according to McKinsey.1)

The impacts on cash flow, business agility, and fraud risk are substantial (read Parts 1 and 2 of this three-part series). But, as worrying as those are, the effect on supplier and vendor relationships can be particularly damaging with slow, paper-based, and inflexible payment methods. In this last part of our exploration of a CFO survey conducted by PYMNTS.com on behalf of Corcentric, we’ll look at how companies that have more fully adopted payments digitization are reaping the relationship management benefits — a critical advantage during times of supply chain upheaval.

What’s in your wallet?

By a sizeable (but admittedly shrinking) margin, checks are still the most commonly used form of B2B payment method followed by ACH transfer, wire transfers, then cards. But it’s not just about what type of payment is used than whether it is part of an automated digital payments process. A manual process is slow, can be error prone, and is open to risk and fraud — not the best supplier relationship tools.

What’s in their wallet?

According to the survey data in the PYMNTS.com report, the biggest companies are leading the way in digital payments transformation, with financial services and healthcare sectors ahead of the crowd overall. Strengthening supplier relationships may not rank as the biggest prize in the finance industry’s payments digitization basket of benefits, but more than 50% of CFOs in healthcare, retail, and more supplier-reliant industries like manufacturing say it’s had a positive impact.

Why your suppliers will thank you

Your suppliers are a key part of keeping your business, and commerce in general, running smoothly (or running at all during supply chain disruptions). They are vested in your success – you’re a valued customer, after all – but they are in it for the money. They want to get paid on time, if not earlier, using the payment method they prefer and with minimal or no errors and exceptions. Payments digitization makes it easier to achieve this consistency, especially at scale — which is why bigger companies are bigger adopters according to the PYMNTS.com survey. Add in the advent of the mostly remote workforce, and digital payments transformation becomes a must-have. Not coincidentally, CFOs in the survey cited “Employee Satisfaction” as one of the highest-ranking benefits, so internal and external relationships are both strengthened.

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Size Doesn’t Count in Digital Payments Transformation

While the biggest companies are leading the way in the digital transformation journey, here’s the irony: According to McKinsey, digital transformation gets more difficult when you’re a bigger enterprise2. In fact, companies with less than a hundred employees are two-and-a-half times more likely to get digital transformation right than enterprises with more than 50,000 people.

If you think about it, it makes sense. Smaller companies are more agile and are more likely to foster a corporate culture where digital transformation, including payments, is embraced and supported. It’s easier to turn a speed boat than an aircraft carrier. Bigger companies may have more impetus, i.e., a lot more payments to make, and the resources to make digitizing payments a priority, but more streamlined organizations are better at getting it right. There is something to learn from examining both ends of the capitalization spectrum.

Here’s another complicating factor in favor of fast tracking the payments digitization: According to a poll cited in Supply Chain Management Review, 70% of respondents are increasing the number of suppliers they source materials and products from in order to mitigate ongoing supply chain disruption3. More suppliers, more payments, more relationships that need managing.

Don’t Be That Company

The PYMNTS.com survey revealed that 65% of CFOs surveyed expect payments digitization to help improve their collaboration with suppliers (not to mention customers and internal teams). This digital transformation is meant to help companies position themselves for long-term changes to the economy and be more responsive to shifts in the marketplace through being nimble and adaptable.

The subtext here is that digitizing payments to make the process more efficient is one way companies are striving to be a “customer of choice” to their most strategic suppliers, and all the advantages that brings. Continuing with slow, manual payments is a great way to not make the most valuable customer list.

Think of it this way: You go out for a nice dinner with a group of friends and when the bill comes around everyone pulls out their phones and the Venmo / Apple Pay / PayPal transfers start flying. Instead, you say “I’ll mail you a check.” Guess who’s not getting invited out with the gang next time?

Download your copy of Business Payments Digitization: How Financial And Healthcare CFOs Build Healthier Balance Sheets from PYMNTS.com and Corcentric. Then check out Parts One and Two of this series to see how companies are achieving agility and risk management.

  1. McKinsey and Company, New trends in US consumer digital payments, October 2021.
  2. McKinsey and Company, Unlocking success in digital transformations, October 2018.
  3. Supply Chain Management Review, Supply chain disruptions drive up costs, complexity at large enterprises, July 2022

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