In B2B, Better Supply Chain Relationships Through Cutting The Paper (Check) Chase

We all know that B2B represents a huge market, ripe for a sea change in how payments are done.

For financial supply chains, cutting to the chase: It’s time to cut the paper chase.

To that end, WEX has introduced accounts payable (AP) B2B payments across its integrated payables platform, which is powered by its network, dubbed Paygenus. The company said in an August news release that the integrated accounts payables platform operates through a cloud-based and bank-agnostic framework, allowing for flexibility in payment processing and greater transparency across the buyer-supplier relationship. The tech-driven supply chain solution works with a range of payment options, from virtual accounts to network settlements to checks.

In an interview with PYMNTS, Maurice Brown, director of Vendor Enablement at WEX, noted that businesses remain committed to paper checks, accounting for roughly half of the flow of B2B funds – even though electronic payments (ePayments) have been around for years, as have virtual cards.

Despite the advent of electronic modalities to eliminate paying via checks, “most of the burden still lies with the buyer,” said Brown. And when it comes to embracing newer payment modalities, the person or people on the buying side of the B2B equation still must do a lot of the work on the front end. That means liaising with the procurement department and expressing the corporate commitment to suppliers that ePayments will be the way to pay moving forward.

One road map may be gleaned from payroll’s evolution, according to Brown: Years ago, every firm did their own payroll. Companies handled everything related to those functions in-house, with the realization dawning that this was not their core competency. The movement, then, has been to outsource to other companies, such as ADP.

“We are going to see the accounts payable market moving that way,” Brown predicted, with companies determining that AP management lies outside the scope of their core competencies.

They will look to migrate to partners and systems that can foster electronic payments from day one, said Brown.

What about companies that are decades old? Migrating on day one, he said, means gathering up the modalities that span ACH or paper checks or virtual cards being handled, many times, by separate internal processes. The migration to day one means, “Buyers will just send us a single file with all the payment modalities” and then the platform converts those files into payments, which can include using terms-adjusted or discount-adjusted strategies.

This is where the Paygenus Network comes into play, said Maurice Brown. Buying organizations will spend less time managing the myriad of ways suppliers want to get paid or juggling bank account information.

“For us, it starts with building the vendor profile on an individualized basis,” said Brown of WEX. He likened the profiles to those seen on LinkedIn, featuring business rules centered around how companies want to get paid — by ACH, for example, or a virtual card up to $25,000 (with a hard limit). Then, when a file comes in from buyers, WEX knows how each vendor needs to be paid and acts accordingly.

Discussion of ACH turned to same-day credit and debits, recently introduced via NACHA. Brown stated that anybody who designs B2B payments systems “needs to have their minds open to many different payment modalities … and needs to make sure they have the value to the vendor in mind.”

The strategy in B2B, and in getting suppliers to accept different forms of electronic payments, he said, “has been a forceful type of method, which has been a poor way to execute.”

“We have to understand exactly what’s in it for the buyer and what’s in it for the seller,” he added. “A supplier may be willing to do certain things if they can get paid faster” or are paid in a certain modality. Better information fosters better relationships between buyers and sellers and can help cut down on the paper exchange, said Brown, leading to, for example, electronic invoicing (eInvoicing).

This enhanced communication deepens the relationships in place between buyers and sellers and improves entrenched business processes across both accounts receivables and payables.