Easing Payables Friction Is Good for Customers and their Suppliers
When Corcentric collaborated with PYMNTS to produce The Payables Friction Index: Barriers to Invoice Automation, the goal was to effectively quantify AP friction-associated processes as well as to discern what barriers might be slowing down an inevitable transition. For companies who have not automated their AP processes, here is the reality: to stay competitive in today’s economic and global business environment, AP and overall payables transformation is not a matter of “if” but “when.”
What is the Payables Friction Index?
To create the Payables Friction Index, the team surveyed executives at 2,570 firms “to examine their AP processes, seeking to offer a deeper understanding of the payments issues with which these professionals deal on a daily basis and how automation can help alleviate them.” It is no secret that manual and paper-based processes are cumbersome and prone to inaccuracies, errors and fraud…the very causes of “friction.”
Many companies, especially SMBs, are still dependent on these legacy processes due to a number of reasons, including concerns about disruption, timing, and cost. Many of these concerns are based on misinterpretations of the cost, ease-of-use, and timing of implementation of automated solutions. Nonetheless, this can create barriers to transformation.
Removing friction requires better communication with suppliers
As an example of what may be described as business inertia, the Index found that although 80.8 percent of those surveyed still use paper checks to pay supplier invoices, only 51.3 percent indicate satisfaction with this payment method. Why continue? Because this is a process (costly and time-consuming though it may be) that AP departments are used to and because many of these companies assume that is the way that suppliers prefer to be paid. However, in our Friction Index Playbook, we found this key takeway:
14.2% of suppliers want to be paid with paper checks, yet 80.8% of firms still use this method
In order for optimization of the payables process, both buyers and suppliers need to be speaking the same language when it comes to technology. What we find is that the most successful outcomes take place when trading partners come together. Although it is the customer who first explores automated solutions and digitization, suppliers need to be made aware of the benefits that accrue throughout the entire transaction lifecycle.
Suppliers want, above all, to be paid on time and with as few exceptions as possible. But suppliers also want options when it comes to receiving payments. Providing them with ways to receive electronic payments (ACH, digital wallets, and credit cards along with paper checks and cash) goes a long way towards creating an open, transparent, and sustainable relationship that benefits both parties. Companies who look to remove friction by transforming their payables processes need to ensure that when considering implementation and in-house training, they do not forget to develop on-boarding processes for suppliers as well.
Download the Payables Friction Index to see how businesses respond to a wide range of payables issues.