B2C payments are thoroughly digitized and automated, but B2B payments are still frequently paper-based. In fact, recent data estimates 50% of B2B payments are still made via paper check. Paper invoices and checks lead to lost information, lost money, and less efficiency. With innovations in payment technology available to streamline B2B payments, there’s no better time to implement an efficient digital payment process.
The problem with paper
Paper-based payments are notoriously unreliable and prone to risk. A paper invoice or check runs the risk of being lost or prematurely destroyed. Record-keeping on these payments also requires more steps than digital payments, leaving room for human error. The potential for incomplete information leads to further risks of lost money and damage to the relationship between buyer and seller.
Paper checks also serve as popular vehicles for attempted and successful fraud, according to a recent survey from the Association for Financial Professionals. “Every year between 2015-2019, at least 73% of surveyed U.S. companies experienced actual or attempted fraud, and for at least 70% of those companies, it was in the form of check fraud,” noted Payments Journal.
Relying on physical invoices and payments often requires physical interaction between the two parties, which creates its own set of challenges. It can be difficult to align schedules to complete something as simple as a signature. It’s inconvenient at best, impossible at worst. Requiring a wet signature prevents many long-distance transactions, and the risk of lost forms makes relying on a postal service an unattractive option.
There’s a fundamental truth that can’t be denied: Paper-based transactions are inherently less efficient than digital.
Solving the paper conundrum
There are several ways to tackle the transition from paper to digital transactions for B2B payments. The first is to embrace proven B2C methods that have infiltrated our personal lives. For example, adding an ecommerce portal on a business website could provide the ease and functionality necessary to encourage online payments. B2C payment methods are familiar and easy to understand, but may lack some functionality to manage larger, more complex payments and may be difficult to integrate with existing B2B systems. Despite these challenges, B2C methods offer an established entry point into digital payments.
Specialized B2B payment technology is another avenue to consider. Commercial payment platforms are typically customizable to satisfy the needs and necessary integrations of B2B companies. Due to the inherent complexity of B2B payments, there is increased vulnerability to fraud, especially when using a paper-dominant process. Automating the B2B payment process can help teams reduce their risk of fraud by flagging invalid or suspicious invoices, monitoring activity, and controlling access to sensitive payment information. As with any technology investment, business leaders should expect a time and financial commitment to get the new payment system up and running and team members trained.
If adding new technology and processes to an already resource-constrained team seems too daunting, outsourcing this function may be the perfect solution. Outsourcing can provide the needed resources and expertise, without the overhead cost or added workload. It is a cost-effective solution that is easily scalable to meet business needs. The key to making this approach work is to be selective in the vetting process to ensure any outsourced partner is reliable, effective, and secure.
Selection and implementation
Choosing the right solution for your business requires thorough research and discussion. It’s important to consider the needs of the business, the existing systems and their interactions, and the time and resources available to dedicate to the change.
Once a method is chosen, the next step is implementation. Every method requires a different level of implementation, and it’s vital to do so properly. Rushed or incomplete digital payment methods are more harmful than useful.
New technology for B2B payments is gaining ground. Now that it’s here, it’s crucial for commercial credit professionals to move beyond paper for good. By choosing and carefully implementing the correct digital payment for your business, you can move past paper to a more efficient future.