Published : 2 years ago, on 04/04/2023

Interview with Andy Downman, Director at B2B payment specialist, Adflex

While consumers struggle to manage their personal finances, businesses are prioritising balancing the books. Profit margins are under pressure with everyday costs such as energy bills continuing to rise. On a global scale, inflation is driving up the cost of materials and products, and as currencies weaken, the cost of doing business internationally increases.

Global Banking & Finance Review recently sat down with Andy Downman, Director at B2B payment specialist, Adflex, to discuss how digital B2B payment transformation can support businesses during economic uncertainty.

What can businesses do to maintain margins? 

The knee-jerk response to increased expenses is to raise prices to maintain profit margins. But we have to recognise that economic pressures impact buyers just as much as suppliers. Significant price hikes could be perceived as unfair and could even damage customer relationships. It cannot be the only strategy for maintaining profit margins.

Businesses should instead look for where savings can be made, which means tackling inefficiencies. B2B payments are still widely managed via paper invoicing, an area susceptible hundreds of wasted hours annually. By modernising processes, however, businesses can reduce costs and simultaneously improve cashflow.

What are the issues associated with legacy B2B payment processes? 

Many business’ payment processes have remained mostly the same for several years, or even decades. This is particularly common in B2B, where other buyers still use traditional invoicing or BACS to pay suppliers.

Traditional invoicing is slow. It requires the management of large balance sheets and invoices by accounts payable (AP) teams. It is prone to human error – which requires more time and resource investment to monitor and correct.

Even when managed correctly, it’s often labour-intensive. Many businesses collect payments using legacy methods, where a business calls or emails a supplier to make a payment. In cases of late payments, which are sadly all-too-common across industries, further cost is pushed onto the supplier as they have to chase up creditors. These are costs that businesses cannot afford to incur on a regular basis.

What are businesses doing to solve these issues? 

The best way for a supplier to ease the late payments pain is to make it easier for a buyer to make a payment. With a line of credit offered by commercial cards, this needn’t negatively impact the buyer.

This is one reason why we’re seeing businesses increasingly turn to commercial credit cards. Linking a commercial card to a payment platform, which can be seamlessly integrated into a back-office system using APIs, a business can then extend its days payable outstanding (DPO), while minimising the supplier’s days sales outstanding (DSO) and decreasing the costs of cash collection.

Commercial cards are part of the move to digital B2B payments that can help drive further efficiencies. Straight-through processing (STP) is another of these technologies. It allows the buyer to ‘push’ a payment, instead of the supplier having ‘pull’ a payment, reducing the time burden on both sides. In some cases it can even be automated to remove manual processes entirely. For suppliers, receiving payments faster is a huge relief at a time when day-to-day costs are rising.

As already mentioned, it also eases the burden on accounts teams, who no longer have to chase up payments and can spend less time manually logging individual transactions and maintaining datasheets. Transparent, real-time, reporting data is key to informed business decision making, as it enables businesses to have an up-to-date and clear view of cashflow to forecast resources. In the current climate, this is vital to ensuring the business can carry on as usual. And in more prosperous times, this is how a business grows.

Is now really the time for businesses to be refreshing their payment processes? 

Business payments have long been talked about as a future multi-trillion-pound opportunity for digitalisation. That time is now.

Those still thinking about digital B2B payments as a distant prospect run the risk of falling behind competitors. Global financial pressures mean the need to improve cashflow and cut wastage is now under the spotlight, and those that recognise the need for modernisation can get ahead of the competition.

Most implementations today can be carried out with little-to-no disruption to core business processes. This is enabled by API integrations and agnostic payment platforms that provide choice for businesses of all sizes.

What impact can digital payments processes have on businesses in the future? 

As rising costs and inflation take their toll on profit margins, cashflow becomes critical to survival. Those that can get rid of outdated, inefficient processes are already one step ahead of the game. Longer-term, efficiencies created  today will present a competitive advantage once markets recover, with better margins enabling savings that can be passed on to customers. Ultimately this enables businesses to outprice competitors still suffering from slow and costly manual processes.

There’s a lot of tough decisions facing businesses today. Deciding whether to digitise payments is no longer one. The technology is there, the market need is more urgent than ever, and B2B businesses in almost every industry are starting to wake up and recognise that the future digitalisation they have been waiting for is right here on their doorstep.