Published : 6 years ago, on 24/10/2018

Adopting a fintech mindset can have massive impact within the four walls of the enterprise, streamlining and accelerating the payment process and the financial supply chain — resulting in dramatically better outcomes for both customers and suppliers. 

By Nilay Banker, Founder and CEO of Inspyrus, Inc. 

Digital disruption is making way for new entrants and new models in the banking and financial services arena ala “fintech,”but corporate finance departments are also catching the fintech bug to innovate and streamline the financial supply chain for better, faster outcomes that empower both vendors and suppliers.

In the past, Accounting and Finance have been overlooked when it comes to the latest business transformation innovations. But they’re finally getting credit where credit is due. Today, technology is revolutionizing the procure-to-pay process, providing the requisite velocity and transparency to support payment automation and dynamic discounting (where suppliers proactively offer early payment discounts on approved invoices awaiting payment). Forward-thinking executives are taking advantage of payment automation and dynamic discounting for fierce financial impact – tapping into a new source of cash that’s changing the finance game.

Nilay Banker

Payment automation along with dynamic discounting allows businesses to dramatically increase payment efficiencies, cash-back rewards and early pay discounts by increasing automation, reducing the labor burden on both AP and IT, and providing a much more “supplier-friendly” early-pay discounting approach. By automatically processing payments based on the scheduled pay date (since invoices were already approved during the invoicing process) and moving all supplier payments to electronic forms of payment, organizations will see a quantum leap in process efficiencies, reduced costs and increases in cash-back rewards.

In addition, by giving suppliers the ability to request early-pay discounts when they need cash and the added instant visibility of inflight invoices, enterprises can expedite processing of discounted invoices and see a marked improvement in supplier participation and cashflow. Arming the enterprise with the ability for suppliers to dynamically request early-pay discounts fundamentally changes the game, providing a win-win for both sides of the procure-to-pay value chain. Coupled with payment automation, it delivers the fastest payments for suppliers, while maximizing discount returns for customers – especially when compared to traditional legacy investment alternatives notorious for their slow time-to-value.

Payment automation and dynamic discounting are fast becoming critical tools of today’s new breed of forward-thinking CFOs who are discarding the outdated practice of sitting on cash, delaying payments and writing checks—which has proven to deliver inadequate returns and tremendous inefficiencies (in terms of process, resources and cost).

The 2017 AP & Working Capital Report by PayStream Advisors identifies the top ways organizations are optimizing working capital, leveraging new disruptive approaches to transform Accounts Payable (AP) functions from cost centers to profit centers by unlocking hidden value, unleashing new and significant revenue streams and process efficiencies. According to the study, dynamic discounting – once relegated to only to the most sophisticated best-in-class finance organizations – continues to expand its sphere of adoption due to the provocative business case and the number of organizations saving millions of dollars, by implementing dynamic discounting as a discipline.

Payment automation is also increasing the value AP departments bring to the organization. According to The State of ePayables 2018: The Future of AP is Now report by Ardent Partners, “… tasks such as invoice matching, supplier inquiries cutting paper checks, and any manual- or paper-led processes within invoice and payment management, erode the potential value of AP by reducing the amount of staff time available for more strategic activities.”

Organizations leveraging payment automation and dynamic discounting are surging ahead of their peers by making early-pay discounts a real and significant source of cash—capturing $5 per payment in benefits and up to 2% of corporate spend directly back the bottom line and optimizing cash management in real-time. As a result, CFOs of these organizations are blazing a trail for the “new normal” in corporate finance where the accounting department is now a profit center.

According to the Bavelos Group, a consulting firm that advises companies on ways to improve working capital, “leading companies are rapidly finding that early payment discounts are an attractive option for treasury to invest cash at double-digit, risk-free returns. A 2% discount for a 20 days cash acceleration is a 36% annualized return. And while not all suppliers offer this level of savings, over 50% of early payment discounts yield better than a 30% return.”

By paying early and creating a supplier friendly and flexible environment, CFOs are transforming AP functions from cost centers to profit centers by unlocking the value trapped inside payables – and supplier relationships. To maximize the potential of this paradigm shift, organizations need speed, visibility and agility. Payment automation and dynamic discounting needs to be coupled with next-gen invoice automation and supplier enablement to ensure that the procure to pay process is a high-performance, well-oiled machine; this enables enterprises to quickly capitalize on cash-back rewards and every early-pay discount available, properly nurture their supplier networks and substantially reduce invoice processing and payment costs.

To realize this new finance nirvana, it’s critical to take a holistic and optimized approach where these capabilities along with invoice automation and supplier enablement are combined and deeply integrated into the ERP system into a single, unified solution—known as the AP Automation Platform. Anything less creates undue complexity, risk and lackluster improvements that ultimately undermines automation and business performance goals. The industry is rife with examples of failed or underperforming projects due to fragile, piece-meal integrations of disparate solutions. The AP Automation Platform delivers a truly innovative approach that maximizes the value and performance across the entire AP invoicing process and value chain – delivering new and compelling levels of automation and sources of cash.

Other key enablers of this transformation are cloud and mobile technologies. Together, these technologies dramatically accelerate time-to-value and enable processing work and approvals to be done anytime, anywhere and via any device — eliminating traditional processing bottlenecks and enabling Finance to securely bring other key stakeholders – suppliers – directly into the payment process. Providing a supplier portal provides the self-serve means for suppliers to easily check the status of payments, see purchase orders for all their sites, quickly flip POs into invoices — and most importantly, easily request early-pay discounts. Bringing suppliers directly into the process enables suppliers to create invoices that are validated and exception-free from the get-go. And by creating valuable frictionless experiences for suppliers, companies can see a tremendous boost in supplier adoption to drive an equally impressive increase in early-pay discounts and new process efficiencies.

Adopting a fintech mindset can have massive impact within the four walls of the enterprise, streamlining and accelerating the payment process— resulting in dramatically better outcomes for both customers and suppliers. The revolution in enterprise payment operations is charging full steam ahead. Success favors the bold in today’s forward-thinking finance organization, where incremental thinking is being left behind in favor of real innovation and value creation.

About the Author

Nilay Banker is the Founder and CEO of Inspyrus. He is a Stanford Computer Scientist with over 23 years of experience with cutting edge technologies and successfully delivering business software products for Fortune 500 companies. Previously, as Director of Product Development—Oracle Fusion Middleware and WebCenter, he was instrumental in developing strategies and roadmaps for several products in addition to taking these products to market.