For a very long time, mid-market companies considered optimizing or digitizing their operations and processes revolutionary. However, recent developments made this a necessity! Digitization of payments is no exception. And, in all honesty, digital payments were considered a bonus that businesses rarely used, but that changed in 2020!
It drove businesses and their consumers to adopt contactless payment methods, which are slowly becoming a preferred method. The pandemic played a major role in shifting consumer preference to online payments which businesses tapped into while they grappled with disrupted supply, reduced sales, and cash flow. The businesses which accelerated their efforts to offer digital payment modes during this period were able to retain their customers and deliver a consistent experience.
When you consider this from the standpoint of a CFO’s office, then manual and paper-based payment processes have an efficiency and cost impact on effective invoice delivery, collections, and payment posting.
The CFOs office had implemented short-term fixes by automating AR processes in bits and pieces to accelerate these processes. But, the temporary fixes need to be re-evaluated and replaced with a streamlined and scalable cash flow management process for B2B payments. Doing so provides enhanced efficiency, improves cash flow, and delivers a friction-free payments experience to their buyers.
Businesses today need better data management, faster invoice processing, secured payment modes, and actionable insights. These are the reasons, which have prompted businesses and the CFO office to evangelize digital payments in their AR process. Here are some problems which businesses can solve with this critical move:
Paper-based invoices are expensive, and on average businesses spend anywhere between $16 and $22 to process each invoice manually. Long payment turnaround time can be reduced with improved integration through digital invoicing.
On average, US businesses process more than $12.5 tn in paper checks annually. But these old business habits are expensive to manage, as processing paper check payments can cost a business anywhere from $4 to $20, and it can take days to get processed. And at the same time, causes supply disruption, payment disputes, chances of fraud, increased DSO, and reduced cash flow.
Outdated payment methods impact credit decisions, delay customer onboarding and future payments. This delay in order to cash increases the chances of disputes and can undermine the customer creditworthiness evaluation.
Businesses are already focusing on solving these challenges and the wheels for this transformation are already in motion, with the B2B payments transaction market expected to grow to $70 billion by 2030, with a CAGR of 10.7% from 2021 to 2030.
Mid-market businesses can succeed with digital payments and optimize cash flow.
Here are the benefits that CFO offices can expect from adopting electronic payments:
Cash flow problems are the biggest concerns of the Order-To-Cash cycle. By automating the payment processes and replacing checks with electronic payments, mid-market CFOs can forecast cash flow efficiently. Giving your customers multiple e-payment options makes it much easier for them to make payments, and it also speeds up the cash conversion process. Additionally, AR teams can gain real-time insights into the business through digital payments to improve cash management and make timely decisions on critical accounts.
Unlike traditional paper checks that can take days to get processed, automated payments are instantaneous. When your customer makes payments via payment portals, it results in immediate reflected payment on the open AR. By using digital payments, reconciliation efforts are eliminated, and manual interference in the reconciliation process is drastically reduced. This also decreases the amount of time spent waiting on cash posting when compared to paper checks that often lead to laborious and error-prone processes.
Unlike paper-based payment processing, digital payments not only ease financial transactions for customers but also allow the CFO office to manage payment data more efficiently. AR Teams can have greater visibility on transaction history, check for payment adherence, and offer credit allowance to customers who make timely payments.
Payment enablement options are becoming increasingly important to the customer experience. 72% of customers reported that they would abandon a brand after just one negative experience, such as a payment complication resulting from an unclear AR process. In times of growing competition, customers have a variety of options, which means they expect a much higher level of customer service. By integrating digital payments into your customer service strategy, you can gain greater trust in your services while supporting customer retention.
Level up the experience you offer your customers by directly integrating with their accounts payable solutions to push invoices and simplify their jobs to pay you quicker.
There is an evolving payment landscape and your customers expect payment flexibility. Providing a variety of payment options is therefore crucial. Businesses that offer customers multiple ways to pay invoices can increase revenues by as much as 30%. Offering the right mix of payment options can significantly improve the chances that your customers will pay invoices on time.
Streamlining payments with invoice delivery simplifies the entire payment process. Additionally, payments can be received faster by including payment options, such as ‘Pay Now’ embedded in e-invoices and dunning emails. In fact, an option to pay as a guest is the most convenient way for customers to transact and make payments without having to make any commitments.
Change is always difficult at first, but it can become a routine if implemented well. Moving from manual payments to e-payment is one such change that businesses need to drive to increase profitability and CX.
Businesses and AR Teams who have been used to working with manual payment methodologies will always have challenges adapting to all things digital. Sometimes, it could be subjective, for example, it could be easy for a team consisting largely of millennials to transition to digital forms of AR and payment processing. It could also be perception-driven to stay away from digital options, with security concerns being the classic anecdote.
With effective communication, CFOs can easily build trust in their teams, departments, and customers on the benefits of digitizing payments and how it can be a long-term solution for both parties.
Here’s how mid-market CFOs can drive this change and help move from traditional to conventional payment methods –
Digital payments are an excellent initiation point for mid-market businesses looking to move from siloed processes to digitized and streamlined cash flow operations. A holistic AI-driven accounts receivables solution can enable the CFOs office to integrate multiple payment channels, generate consolidated reports with actionable insights, and optimize cost. A streamlined accounts receivable process can also help mid-market businesses increase operational efficiencies and forge stronger customer relationships.
HighRadius’ Integrated Receivables Cloud Platform helps mid-market businesses modernize the Accounts Receivables operations that improve AR efficiencies, reduce DSOs, automate the collection process, mitigate credit risk, increase cash flow, and accelerate cash application. Businesses can leverage the platform’s digital payments service to create guest payment pages, send payments links to customers via emails, and enable web payments.
To know how you can drive digitization in your customer payments with RadiusOne, click here.
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