“The leap in digital payments in just three years is truly significant”
Says Rob Unger, Senior Director Strategic Initiatives & Product Management, NACHA, when talking about how digital payment is taking B2B businesses by storm. He further says that “checks have accounted for a majority of the transactions for decades”, but as the scenarios are changing so is the B2B space. Keeping up with the B2C industries, B2B businesses now are inclining towards e-payments more as compared to checks.
Digital payments( ACH, wire transfers, etc) today amount to nearly 49% of the total B2B transactions. Same-day ACH payments alone made up 36% of the volume. So, what are same-day ACH payments? Automated Clearing House(ACH) payments are electronic payments that pull funds directly from your checking account. Instead of writing out a paper check or paying with a debit or credit card, the money moves automatically. Now the basic question arises: How can ACH transactions benefit your business? Here are a few points to answer this:
“Cash is King”, and businesses need it to improve their working capital & ensure smooth operation. Inability on the analyst’s part to process checks, making up to 51% of the transactions, not only hinders your A/R but also impacts the working capital. Moreover, non-conforming payments increase your accounts receivables leading to bad debt.
With a fluctuating economy, ACH transactions can help your company protect cash. ACH payments not only help in cash application but also help to track same-day cash posting. Enabling analysts to improve A/R and focus their attention where it is most required during an economic downturn. Moreover, ACH payments are:
ACH payments are completely automated since the biller initiates the transaction, and you do not have to take any action.
Even though ACH has increased by 11.5% in the B2B space between 2017-2018 and is “growing like gangbuster”, companies still prefer checks. A major reason behind this is “ most utilities do not allow customers to pay with ACH because they think that the customers cannot conform to the company’s standards” says Rob Unger. Apart from this, remittance aggregation plays an important role. Rob further adds “ACH posting is a pain because of decoupled remittance, and multiple templates”.
According to a survey by Credit Research Foundation, 51% of companies have a 0-20% hit rate when it comes to cash posting. This is widely due to the fact that there is no standardized form for remittance, making cash posting a cumbersome process. Moreover, aggregating information from multiple sources such as EDI, emails, pdf, fax, and spreadsheet causes a delay.
To reap the benefits of ACH payment you need to successfully tackle these challenges.
With the advancement in technology, there are not one but multiple ways in which companies can tackle these hurdles. For example, there is the email parsing engine to gather remittance information from the emails, AI-enabled bot to collect data from different web portals, etc. But wonder having a single platform for your varied customer base, enabling you to get the payment information in a standardized form of your choice. It is now possible to validate your entire customer base via a single tool. Here is how you can achieve this:
According to professionals, a major roadblock in obtaining 100% straight-through cash posting is the Many-to-Many situation. “Suppliers have several variabilities in their needs whereas the buyers have multiple systems and different expertise”. This leads to non-standardized remittance information.
To overcome this roadblock, NACHA along with HighRadius came up with an AI-powered platform: the EDI VALIDATOR. It helps your customers send the correct information so that you do not have to solve it at the back end. This is a prepayment tool that validates the buyer’s remittance advice as per the supplier’s needs. Here is a brief overview of how this validator works:
But the tool is not just limited to validating remittance advice. The tool can identify and also point you directly to where the error is and how it can be rectified.
Apart from this, the suppliers can also send automated emails to customers, track who has uploaded the remittance data, and what errors were encountered. The fact that nothing changes in the payment process is the cherry on the top. The only change that occurs is that now you get remittance data in a standardized format of your choice enabling you to get a 100% straight-through ACH cash posting.
NACHA has been trying to make e-payments more convenient, faster, and standardized for years. With the new EDI VALIDATOR, it is determined to transform ACH transactions for the good.
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HighRadius Cash Application Software enables the end-to-end automation of the cash application process that covers major benefits such as AI-enabled data capture for remittances, auto-linking of payments with open invoices, cost-cutting on lockbox fees and easy compatibility with any system due to its ERP-agnostic Saas infrastructure. Apart from the major benefits that it has, there are some key features which can not be missed out, some of them are Email Remittance capture, Discounts and Deductions Handling, Check Remittance Capture, Web Remittance Capture, Invoice Matching, and RDC & Mobile Payments.