Competition and market demand are creating opportunities for technology firms, but they are also making back-office payment frictions worse.
While the tech sector has fared far more favorably than others because of the central role it has played in enabling consumers and businesses to adapt to the pandemic, strong demand and competition are create their own challenges.
Meeting demand requires robust and well-functioning back-office capabilities, and PYMNTS research found that many technology executives believe their payments operations are not necessarily up to the task.
In fact, 75% of technology firms view their payments operations as “somewhat effective” at best, according to the Smart Receivables Playbook, a PYMNTS and Flywire collaboration.
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The largest share of technology firms — 68 percent — view their payments operations as just “somewhat effective.” Another 7% view them as “not at all” or “slightly” effective. Just 25% of technology firms view these operations as “very” or “extremely” effective.
Tech Firms’ Top Five Pain Points
Some universal challenges specifically affect accounts receivable (AR) effectiveness across sectors, such as payment delays and complications around processing different forms of payments.
In fact, most businesses report monthly revenue losses caused by time spent dealing with antiquated AR infrastructure and processes.
Read more: Flywire: 2021 was the Year of Digital-First
The intensity of the various universal pain points depends a great deal on the nature of the industry and market conditions, however. Financial fraud, managing multiple vendor relationships and accepting international payments are key pain points cited by organizations overall, but they are particularly likely to cause problems for technology firms.
The top five AR pain points facing technology firms are financial fraud (cited by 19% of technology firms), managing multiple vendor relationships (12%), accepting international payments (9%), obtaining real-time access to sales and transaction data (9%) and handling payment questions from customers (8%). These are the issues cited by technology firms as the most pressing challenges impacting their AR operations.
Financial fraud has been a mounting concern for companies across the economy as bad actors have sought to exploit the growing share of economic activity taking place online. Not only are firms’ funds at risk, but also those of their business partners. These risks must also be factored into how a company calibrates its cybersecurity challenges since ineffective fraud detection can create “false positives” and improperly block legitimate payments.
The challenges facing AR departments are magnified when companies do business in foreign markets, and this often comes with the territory for technology companies.
A Sea Change in AR Processes
The notion that existing AR processes are outdated and outmoded is not new. The U.S. government has estimated that paper-based invoicing costs the economy hundreds of billions of dollars each year.
Myriad technological innovations have emerged to smooth out these inefficiencies, such as optical character recognition (OCR) and eSigning capabilities.
The development of cloud systems and robust global connectivity represent a sea change, however, enabling not just the use of a few plug-in tools but empowering a shift to digital platforms that offer end-to-end visibility and control over AR.
The challenge for AR leaders — including those in the technology sector — is how to make use of these platforms to meet their specific needs while minimizing the requirements for additional staff and expertise to implement and run them.