Taking the Friction Out of Payment Processes

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The last mile in any digital business process that drives revenue is collecting payments. As it turns out, however, it’s often the most archaic. Suppliers typically scan an invoice that they then email to a vendor that then takes anywhere from 30 to 90 days or more to process before a payment is made. Sometimes that payment is made electronically, but there are still many organizations issuing paper checks.

At a time when organizations of all sizes are embracing digital business transformation initiatives to modernize business processes, it’s obvious to all that the way many organizations process invoices and payments belies those efforts.

The truth is many organizations are playing a form of arbitrage when it comes to making payments. They are trying to maximize their cash flow and any interest they might be able to generate by deferring payments as long as possible. The overhead involved in managing those processes, however, is often more trouble than it’s worth. In fact, many organizations now provide customers with substantial discounts if payments are made in less than 30 days.

Vendors such as Salesforce have noted this trend as well. The provider of a portfolio of sales and marketing applications as a service in partnership with Stripe just added Commerce Cloud Payments, which enables organizations to embed a payment processing capability into their Web sites. Those payment services support everything from credit cards and mobile wallets such as Apple Pay and Google Pay used mainly by consumers to banking services such as Single Euro Payments Area (SEPA), iDEAL and Bancontact that provide integrated fraud protection relied on by many companies.

The alliance with Stripe is part of an effort to enable organizations to provide a better customer experience, says Adam Blitzer, executive vice president and general manager for digital at Salesforce.

“Payments are part of the core customer experience,” says Blitzer.

Most consumer-facing Web sites today can easily process transactions. However, when it comes to payments between organizations, there’s clearly a lot of room for improvement. Some organizations are able to make electronic payments, but many smaller companies still rely on paper checks. The amount of time it takes for most organizations to process an invoice has not substantially decreased no matter the payment method.

Enter the pandemic

The COVID-19 pandemic has clearly forced the issue for many organizations. Many accounting teams have been required to work from home. Legacy applications relied on to process payments are cumbersome to work with remotely. Modernizing payment systems is now on the agenda for organizations as they look to reduce dependencies on processes that require personnel to be in an office. Arguably, this transformation is long overdue. Services such as SAP Ariba have made a significant dent in shifting purchasing online, but there are still many organizations processing invoices using legacy processes, even when those invoices are delivered as a PDF file.

It may take a while before payments between companies and suppliers are made the same way they are between a consumer and a vendor. However, it’s pretty clear that expectations concerning payment processing are finally starting to shift toward making payments the minute it’s been verified that the goods and services described in the invoice were actually received. Before too long, organizations that can’t live up to that expectation will find themselves on the outside of digital business processes looking in.

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