Across the board for B2B (Business-to-Business) businesses, receiving payments late is one of the top pain points they have in general. Payments for both large and small businesses are an average of 40.3 days late. There are plenty of problems that result from consistently collecting late payments. For small businesses in particular, the delays in payment can cause issues in securing financing.
One way to alleviate much of the struggles with late payments is to automate your B2B payments. B2B payment automation not only provides customers with prompt invoices and payment reminders, it can also reduce the errors in collection and so much more.
TL;DR
Automation can cover all the steps of your payments process, from invoice capture to final analysis and optimization.
B2B payment solutions automate a variety of aspects of your payment services, such as sending invoices, setting payment terms, tracking payment statuses, and more.
Automating your B2B payments provides huge benefits in cost savings, time savings, and increased cash flow.
What is B2B payment automation?
B2B payment automation is the use of software to streamline, simplify, and manage financial transactions between companies.
B2B payment automation solutions replace these manual steps with digital solutions, reducing the administrative burden, streamlining the payable process and payment cycles, and minimizing the risk of errors. Automating B2B payment processing even cuts down processing time.
Automated solutions include using electronic invoicing, automated workflows for approvals, and digital payment methods like ACH payments, wire transfers, electronic checks, debit and credit cards, or virtual cards. Some solutions even enable you to take Paypal. Whatever B2B payment methods are currently popular – an automated solution enables you to accept them.
How does B2B payments automation work?
B2B payment automation works by digitizing and automating the end-to-end payment process, eliminating manual intervention and streamlining transactions. Here’s a detailed breakdown of how it operates:
Step 1. Invoice Capture
The process kicks off with invoice capture, where automation tools gather invoices from different sources like emails, electronic data interchange (EDI), or accounting software. Using technologies like Optical Character Recognition (OCR) and machine learning, these tools pull out key details—like invoice numbers, dates, amounts, and supplier info—and convert them into a standardized digital format for easy processing.
Step 2. Approval Workflow
Once the invoices are captured, they move into an automated approval workflow. Based on the rules and criteria you’ve set, the system automatically routes invoices to the right people or departments for review. For example, invoices over a certain amount might need multiple levels of approval. These automated workflows ensure that everything complies with internal policies, reduce bottlenecks, and speed up the approval process by sending reminders and notifications to the approvers.
Step 3. Payment Processing
After approval, the system takes over and schedules payments according to your business’s preferences and cash flow situation. Payments can be made through various methods, like ACH transfers, electronic checks, virtual credit cards, or even cryptocurrency if you’re using a more advanced system. Automation ensures that payments are accurate and on time, helping you take advantage of early payment discounts and avoid late fees.
Step 4. Reconciliation
Once payments are made, the system automatically reconciles them with the corresponding invoices. It matches payment details with the invoices and updates your financial records in real-time. This cuts down on errors that often come with manual reconciliation and keeps your books accurate, making audits and financial reporting a whole lot smoother.
Step 5. Reporting and Analytics
Finally, automated payment systems come with powerful reporting and analytics tools. They give you real-time insights into your cash flow, outstanding invoices, payment patterns, and how your suppliers are performing. With this information at your fingertips, you can make smarter decisions, optimize your payments process, manage your working capital more effectively, spot opportunities to save money, and build stronger relationships with your suppliers.
Top benefits of B2B payment automation
For the unfamiliar, it makes sense to be uncomfortable adopting automated billing. Perhaps you think your billing processes are fine the way they are. Perhaps you’re worried the investment won’t pay off. These are understandable concerns. But you might feel differently once you’re acquainted with the many benefits of automated billing like accepting a variety of payment types beyond card payments and checks, taking international payments, and integrating with your ERP and accounting systems.
Payment automation functionalities boosts cash flow, produces secure business transactions, reduces inefficiencies, expedites invoice processing, and overhauls the entire payment process.
There are many ways that payment automation saves businesses time and money. Once you see them, you’ll never want to go back to manual processes again.
1. Radically reduce workload and expedite cash flow.
When it comes to billing, manual processes can take weeks to complete. Not only is the process tedious, but it’s also naturally prone to error. Manual data entry produces the potential for misspelled names, addresses, or even amounts owed.
To err is human. The average person makes over three-quarters of a million mistakes in their lifetime. A decent portion of them are bound to take place at work.
Automated billing technology allows for secure business transactions that are completed in minutes rather than weeks.
Consider the case of JustLogin, an HR tech company with an award-winning suite of software for HR management. Its product was doing great. So great, in fact, that its payment data became difficult to manage by hand.
Its invoice process took weeks to complete. Between payment processing and invoice approval, one cycle had hardly finished before the next began.
By adopting automated billing software, JustLogin was able to reduce its billing process by 90%. The result? Improved payment processes, a healthier cash flow, and a very grateful billing department.
Automating B2B payments platforms also produces significant capabilities for data reporting that can be useful for billing and other departments of your business. From reports on customer spending to accounts payable/receivable information, a wealth of data is easily accessible with an automated billing platform.
There are also major benefits for the customer. While the business seizes the opportunity to reduce costs and improve cash flow management, the customer benefits from flexible payment options, and a predictable invoice experience they don’t have to think about.
While manual processes may have seen bills arrive on the first one month and the tenth the next, the automated process allows for consistency.
2. Improve the accuracy of your payments team
Automating payments removes the chance of human error that often comes with manual processes. For instance, instead of manually entering invoice details—like amounts, dates, and supplier information—automation tools extract this data directly from invoices and standardize it for processing. This helps prevent common mistakes such as entering the wrong payment amount, paying the wrong supplier, or missing payment deadlines.
Automated systems validate and cross-check data as it moves through the approval process, ensuring all details are accurate and consistent. For example, if an invoice is entered with an incorrect amount, the system can flag it for review before payment is processed. This reduces the risk of duplicate payments or overpayments.
By minimizing manual data entry and providing real-time error-checking, your payments team can trust that the system handles the details correctly, allowing them to focus on strategic tasks rather than correcting mistakes.
3. Stop the strain of revenue leakage.
Automating payments can also reduce costs by significantly improving your dunning management strategy. Nothing is more disruptive to your cash flow than bills that never get paid. Manual dunning management requires employees to contact customers by hand, and engage in a long, frustrating process that often never gets resolved at all.
Automated dunning can lower the costs of unpaid invoices and improve cash flow through:
- Automated credit card retries: Missed payments are often accidental. If a customer’s bank account was low on funds or their credit card was maxed out the first time the transaction was run, they might have faulted accidentally. Often, you can try the transaction a second or third time a few days later and the issue will have been cleared up. Automated payment retries retrieve payments without uncomfortable conversations or embarrassments.
- Credit card reminders: Credit cards usually expire every three years. When a customer’s card clicks off you won’t get any payments from them until they update their information. Automated billing platforms can send scheduled update reminders through your billing software to reduce the chances of missed payments. Some automated billing platforms can even perform automatic credit card updating, partnering with the major credit card brands, to make sure customer information is always current.
- Automated customer communication: Your billing platform can also automate your dunning-related customer communication with text messages or emails, making customer contact significantly easier. You can create a sequence of communications and switch up the text in each one, ensuring you’re always sending the right message at the right time.
Most businesses add between 2-4% to their bottom line by switching to an automated dunning strategy. However, bitHeads, a BaaS (backend as a service) company, was able to recover an impressive 5-10% of revenue each month when it started automating its dunning activities.
4. Keeps customers happy.
A good automated billing platform not only expedites processes for your billing department but also provides customers with an extremely flexible experience. Even something as foundational as your product can be influenced by a good billing platform.
With a legacy billing system, something as simple as custom offers or catalog updates can take hours and a call to the IT department to make. For the business, it’s time-consuming and costly. For the customer, it could be a frustrating dealbreaker.
Automated platforms allow businesses to update their catalog in a matter of minutes, allowing sales to create flexible, customized offers for potential customers.
Automated billing platforms also have the potential to please customers by increasing their payment method options. They can support:
- Automated clearing house (ACH) payments
- Paper check payments
- A variety of electronic payment methods
- Card transactions
- Early payment discounts
Billing is the sort of thing customers shouldn’t have to think about. When done right, it takes place seamlessly in the background. A good automated billing platform gives customers a smooth, carefree invoicing and payment experience.
5. Keeps you ASC 606-compliant.
Finally, B2B payment automation software can help you stay ASC 606 compliant. Proper revenue recognition is notoriously difficult in the subscription world. Doing it manually can be next to impossible, especially as a business grows.
General ledger-backed automated billing software keeps your books in order by ensuring your numbers are accurate while producing a solid paper trail that you can produce in the unfortunate event of an audit.
You never want the IRS at your door. If they do show up, however, a good billing platform may mean the difference between compliance and a penalty.
ASC 606 mistakes are no joke. Penalties can range from fines to jail time depending on the extent of the offense.
6. Increases your payments security
Automating your payments significantly enhances security by reducing the risks associated with manual processes, like paper checks and physical handling of sensitive payment information.
Automated payment systems use advanced encryption and secure gateways to protect transaction data, making it much harder for hackers or fraudsters to intercept. Additionally, these systems come with built-in security features, such as multi-factor authentication, to verify the identity of users before they can approve or initiate payments.
They also maintain detailed audit trails, tracking every action taken within the system—who approved a payment, when it was sent, and to whom it went. This makes it easier to detect and respond to any unauthorized activity quickly, minimizing potential security breaches, over all providing a secure payment environment to suit your business needs.
7. Creates stronger supplier relationships
Consistently paying suppliers accurately and on time fosters trust and reliability in your business relationships.
When you automate payments, you reduce the chances of errors like late payments, overpayments, or missing payments that can strain supplier relationships. Suppliers notice when payments arrive on time and without issues, making them more inclined to offer better terms, such as early payment discounts, bulk purchase discounts, or priority service.
By automating payments, you can also take advantage of early payment discounts without the risk of missing deadlines, directly benefiting your bottom line while enhancing your reputation as a reliable business partner.
8. Keeps you ready for audits
Preparing for an audit can be a daunting task, but automated payment systems make it far simpler by keeping a comprehensive, time-stamped record of every transaction. These systems automatically generate an audit trail for each payment—capturing details like the invoice, approval steps, payment method, and confirmation of completion.
This means that when an audit is required, you can quickly access and provide organized, accurate records without sifting through physical files or reconciling disparate data sources.
Having a clear and transparent payment process not only speeds up the audit but also demonstrates compliance and financial responsibility to auditors, reducing the risk of penalties or negative findings.
A pre-condition of success
B2B payment automation and invoice processing are more than just convenient. The world of SaaS is extremely competitive and growth-driven. The vast majority of businesses that fail to grow by at least 20% annually wind up shuttered.
In an industry this competitive, the little things can make a big difference. Automated billing, however, is not a little thing. From maximizing efficiency to collecting on owed bills and keeping the IRS happy, it’s a true powerhouse for keeping your business operating at peak performance.
If you don’t use it, your competitors will. Make sure you show up to the fray of commerce equipped with a flexible catalog and operational efficiency.
