Last updated on February 1st, 2021

In today’s world, cheques and paper invoices really ought to have taken their place in the Retro Hall of Fame, alongside vinyl, polaroid cameras and the Nokia 3210. Curiously, however, paper-based payment practices have shown serious staying power with cheques still accounting for 51% of B2B payments. Why? A few reasons, but principal among them is ‘fear of the unknown.’

If money is oxygen, businesses breathe thanks to the finance department. It’s no surprise then that supply chain company heads are hesitant to mess with the processes that have enabled their payments for decades. What if something went wrong?

To help execs get over this fear, digital payment service providers must prioritise supplier education. If digital payments transformation is to happen in the supply chain, integrators and buyers must share responsibility and communicate their value to the merchants they deal with.

If it ain’t broken…why fix it?

Yes, cheques and invoices are indeed time-tested but that doesn’t make them perfect. Firstly, and perhaps most importantly for suppliers, digital payments can massively speed up accounts payable and, at the same time, reduce the number of late payments.

80% of small business B2B invoices are still manually processed and paid by cheque.2 Considering that late payments strangle cash flow, particularly in the SME, it’s not unreasonable to think that a digital alternative that reduces delays would be welcome, particularly when new B2B payment solutions can also drive up to 75% cost reduction in small business payments processing.

Perhaps it’s the buyers that are stalling the switch. After all, for suppliers to get paid faster, buyers have to remit earlier, impacting their own cashflow. While this is true to some extent, there are compound advantages that more than counterbalance, including the cost savings, enabled by streamlining both the traditional Accounts Payable function and the process of onboarding suppliers. Indeed, this latter process can be so fiendishly costly and inefficient that many buyers have opted to limit themselves to a comparatively small list of preferred suppliers. And with it, their options to explore the market.

Digital efficiency in the supply chain

Digital payments transform the way suppliers are onboarded. By leveraging a stakeholder-agnostic supplier platform, companies can bypass the process overhead and tap into end-to-end onboarding services, reducing both costs and supplier friction throughout the supply chain.

Connecting to a specialist platform in this way also allows large parts of the supply chain to be automated, instantly reducing administration costs for both procurement teams and suppliers together with the risk of human error. Level 3 purchasing cards utilise bespoke electronic card management information systems which can receive invoices electronically, cost-allocate and reconcile without human input.

Valuable data around a business’s cashflow can also be generated and analysed, including information about past and incoming payments that can reveal new insights on the costs of payments and potential opportunities for savings. All good stuff for businesses looking to tighten down on their allocated resources and manage their cashflow more efficiently. 

Getting better all the time

To only talk in terms of efficiency and costs is to miss the bigger picture. As with so many instances of digitalisation, migration to digital payments goes further than making the old-world work better, it also creates opportunity. A good example here is how suppliers can use their digital infrastructure to establish a partner of choice status with their buyers. The newfound flexibility and reduced friction realised by a digital payments platform lead to easier buyer integration, better business partnerships and, ultimately, increased revenues overall. 

Across a variety of industries, from construction to logistics, buyers’ tender documents are enquiring about (and often screening for) Level 3 purchasing card acceptance. Some card schemes (Mastercard, for example) even publish lists of Level 3-accepting suppliers, which buyers factor into their supplier selection. Going digital now gets suppliers ahead of the game. 

Your payments, your way

It also opens the door to innovation. So-called ‘virtual cards’ – the digital equivalent of a plastic payment card – don’t just free up wallet space and reduce dependence on plastic. They can be endlessly reissued on a per-transaction basis, offering limitless flexibility and mitigating the fraud risk associated with sharing and reusing card details. 

While the arguments for digital payments are strong, awareness of their benefits remains low, particularly in markets where neither financial nor technology solutions are a natural fit. This is why supplier education is the biggest hurdle to overcome; only through a clearer understanding of the myriad benefits will decision-makers be persuaded to part ways with their legacy cheque and invoice systems. An evolving payments landscape may create uncertainty, but it also creates opportunity as new APIs and innovative technologies offer companies the flexibility to mould their payments infrastructure to their business like never before.