B2B payment systems have evolved over the years, from manual, paper-based processes to sophisticated digital solutions. Today, the introduction of automation technologies is reshaping the way companies manage their financial transactions.
In fact, 64% of all companies in 2022 made more than half of their business-to-business payments electronically, while only 28% processed them manually. Time-consuming paper checks and costly manual processes are becoming a thing of the past.
In this guide, we’ll explore the complexities and nuances of the B2B payments automation space, including a comprehensive understanding of what B2B payments are, the benefits, top processes to automate, and how to choose a solution that works best for your business.
Table of Contents
What is B2B Payments Automation?
B2B payments automation refers to the software and technology used to simplify, streamline, and expedite the processes for business-to-business (B2B) payments. This involves the integration of digital systems and tools to manage various stages of the payment cycle, from creating invoices to reconciliation; to enhance accuracy, efficiency, and transparency in financial transactions between organizations.
Automated invoice processing opens up a myriad of benefits that are unobtainable with manual inefficiencies. This form of AI helps to generate and process invoices, reducing manual labor and savings on costs. These systems can automatically convert purchase requests into purchase orders, and then purchase orders into invoices, ensuring timely delivery and accuracy.
Payment Approval Workflows
Automated systems eliminate the need for an invoice to flow through the hands of multiple people. Instead, payment platforms will route invoices through the necessary channels for review and approval. This ensures payments are quick and are authorized according to pre-set rules and guidelines.
Automation expedites the execution of the payment itself. This includes sending out mass payments and global payments through a variety of methods like ACH and wire transfers.
Reconciliation and Reporting
AP automation software matches payments payments with corresponding invoices, reconciles discrepancies, and generates reports. This type of software streamlines the entire process of tracking and managing payments, while providing insights through analytics.
B2B payments automation systems integrate with ERPs, syncing payment data with other operational and financial data within a business, ensuring consistency and transparency across various departments.
Security and Compliance
Automated systems enforce compliance with regulatory standards. This ensures payments are made securely, and according to industry-specific and legal requirements.
Types of B2B Payment Methods
The majority of B2B automation solutions provide access to a multitude of traditional and digital payment options. These include:
- Check payments: Outsourced or automated physical check printing, approval, and mailing services.
- ACH: The Automated Clearing House processes ACH payments for the US and global ACH systems.
- Wire transfers: Domestic and international wire transfers using a bank account.
- Credit cards: Traditional credit card services like Visa or MasterCard.
- Virtual cards: A “cardless” payment type that’s usually created for one-time e-payments.
- Peer-to-peer: Online real-time payment services like Venmo, PayPal, or Square
The goal of B2B payments automation is to reduce human error, improve payment times, and create a positive business relationship between the supplier and the customer.
The Rise of Automation in B2B Payments
As automation continues to evolve, the landscape of B2B payments is undergoing a substantial transformation. The adoption of automation in B2B payments has gained momentum due to a variety of factors. Here are just a few of the reasons why it’s so popular, as well as the benefits accounts payable automation can bring your business:
There has been a shift in society’s preference toward electronic payments. Automation helps to facilitate electronic payment methods like wire transfers, ACH, and virtual credit cards. This provides speed, transparency, and convenience for organizations of any size.
Automation streamlines AP processes enabling a company to reduce human intervention and gain efficiency. In a recent JP Morgan survey, 54% of global businesses stated “speed of payment” as a primary factor in choosing cross-border B2B payment solutions. These platforms reduce processing times, leverage early payment discounts, and eliminate costly reconciliations.
Security and Compliance
B2B payments automation integrates security measures and regulatory compliance protocols. This includes the secure transmission of financial data, encryption, and adherence to industry standards, all of which help to mitigate potential risks.
By reducing errors and manual labor, a business can realize considerable cost savings. There’s less need for manual data entry, paper-based processes, and associated overheads. This is also the case when you look at check vs ACH costs. Anything paper-based is always more expensive.
Reporting and Analytics
B2B payments automation platforms generate data that provides valuable insights into cash flow management payment trends, vendor relationships, and more. This helps an organization make more informed decisions and forecast financial strategies.
Automation solutions offer advanced integration capabilities with a variety of tools like ERPs, banking systems, and accounting software. This ensures a seamless flow of data across all departments and platforms, leading to enhanced operational efficiency.
- Fintech Solutions: Financial technology offers agile solutions for the B2B payments space, driving the adoption of automation.
- Accuracy and Transparency: Automated platforms ensure the accuracy of payment execution and reconciliation processes with a traceable record of financial transactions.
- Adoption of Cloud-Based Tools: Cloud-based tools enable scalability and accessibility from anywhere in the world. This allows for easier updates and secure access to payment systems.
- Remote Work: The shift to remote work has accelerated the development of automated payment solutions, allowing for instant collaboration and transaction processing, regardless of your location.
The rise of automation in B2B payments is a direct response to the need for increased accuracy, efficiency, security, and adaptability in an evolving economy. It empowers organizations to streamline financial processes, thereby enhancing competitiveness and productivity in the market.
How do you confidently send secure payments around the globe?
How to Start Automating Your B2B Payments
Automating your B2B payments can reduce errors, eliminate bottlenecks, enhance efficiency, and streamline processes. Here are a few ways to get started:
- Assess Current Systems: Gain a better understanding of existing workflows, including invoice creation, approvals, payment execution, and reconciliation. This will help to identify points and areas that need work.
- Choose the Right Tools: Research and select the automation solution/s that best fits your business needs. Look for tools that offer features for invoice processing, payments, reconciliation, and integration capabilities with your current platforms (like ERP, CRM, and other accounting apps).
- Establish Approval Workflows: Set up automated workflows for payment approvals. Clearly define rules and conditions for payment authorizations to minimize the need for manual intervention.
- Implement Invoicing: Move from manual to electronic invoicing, which includes generating invoices automatically based on purchase orders. This greatly reduces errors and delays.
- Select Payment Methods: The AP team must set up automated payment methods like ACH, wire transfers, and other electronic payment options. The execution of these payments can also be set up based on pre-determined schedules or triggers.
- Compliance and Data Security: Ensure that your system adheres to regulatory compliance and security standards. This includes implementing user authentication, setting up data encryption, and following legal standards for financial transactions and data privacy.
- Employee Training: Provide all team members with training on the new system. This ensures a smoother adoption stage and effective utilization of the tools.
- Monitor and Test: Continuously monitor and test the new system to establish what’s working and what may need to be changed. Identify areas for improvement to help refine your automation. Optimization is an ongoing process.
- Vendor Communication: Establish close ties with your vendors. Immediately communicate changes, address concerns, and collaborate to ensure a seamless transition. Fostering strong supplier relationships will also help when the time comes to scale payment automation tools as the business grows.
Starting this process is the hardest part. Although it may seem daunting, with proper planning and implementation, B2B payments automation can significantly enhance the accuracy and efficiency of financial transactions within your business.
Which Payment Processes are the Best to Automate?
Automating B2B payment processing will significantly streamline operations, enhance accuracy, and expedite real-time payments. Some of the most important processes and manual tasks to automate include:
Automation will generate and distribute invoices according to pre-determined terms and conditions, reducing errors and slashing processing costs.
Invoice receipt and data capture can also be automated. OCR technology can receive, read, and extract data from incoming invoices, reducing manual labor and processing fees.
Automated approval workflows can be established to ensure invoices are always routed to the right people for review and approval, based on pre-defined rules.
Automate the approval process for all payments based on pre-set rules, greatly reducing the need for manual intervention.
The execution of the payment itself can also be automated using methods like EFT, ACH, and other electronic payment types. This also includes scheduling transactions and executing them at a later date.
Automation matches payments with invoices and reconciles any discrepancies between what’s being invoiced and what has been paid. This ensures accuracy and helps to identify any mistakes.
Reporting and Analytics
Fintech tools for automation can help generate reports on payment trends, past-due items, cash flow projections, and other financial insights that can aid in decision-making.
Compliance and Security
Most automated systems have the ability to enforce compliance measures, ensuring all transactions adhere to regulatory standards and security protocols.
Any type of integration with your ERP system is a process you want to automate. This helps to streamline data flow, ensuring information is always updated in real-time, across all platforms.
Automation helps to manage vendor data, track performance, and maintain a database of preferred suppliers and payment terms.
It should be noted that while automation is designed to enhance these processes, human oversight is often still necessary. This is especially the case when handling exceptions, addressing complex challenges, and making strategic decisions.
B2B Payment Automation Solutions: What to Look For
Every B2B payment management software solution should offer the following features and benefits:
- Invoice processing
- Approval workflows
- Multiple payment methods
- Reporting and Analytics
- Security and Compliance
- Vendor management
Does the solution seamlessly integrate with the tools you are already using? Integration capabilities are crucial for a smooth transition and flow of data from one platform to another. Your payment solution needs to work flawlessly with your AP software so transactions, approvals, and payments are in sync.
If your business deals with a variety of vendors, offering different types of payment options is a smart move. A business should be able to centralize this process and administer all payment methods from a secure platform.
If your business deals with international vendors, you’ll need a B2B payments automation solution that supports global payment processing. This means, the software should support multiple currencies and comply with international regulations.
Ease of Use
Is this a tool employees can pick up easily or will they need extensive training? Evaluate the user interface and the level of support offered by the provider. A user-friendly interface and reliable customer support are critical for effective implementation and successful ongoing management.
Look for a solution that can grow with your business. The platform should be customizable and scalable to adapt to an organization’s evolving needs and preferences.
Consider the overall cost of the product and how it fits into your budget. This analysis should cover every cost, including implementation, training, maintenance, licensing, etc.
Tipalti: End-to-End AP Automation
One solution that fits all of the above is Tipalti. The B2B payments automation platform offers end-to-end solutions for automating and managing your entire accounts payable workflow. The system is specifically designed to optimize and streamline B2B payment processes, providing various functionalities to help a business manage payables tasks.
Some key AP automation features include:
- Automated invoice processing with OCR and machine learning capabilities
- Multiple payment methods including ACH, wire, and virtual card payments
- Customizable invoice approvals and workflows with 3/4-way PO matching
- Self-service supplier portal for efficient boarding and vendor management
- Fully automated reconciliation process with reporting for trends and discrepancies
Tipalti is known for creating ease around cross-border payments and international tax compliance. The system focuses on ensuring robust security measures and compliance to safeguard all of your sensitive financial data. It easily integrates with your existing ERP and accounting systems, allowing for an effortless transfer of data across all verticals.
Tipalti offers companies a comprehensive toolset to manage and optimize their accounts payable processes, making B2B payments more efficient, accurate, and compliant with global regulations.
Summing It Up
The evolution of B2B payments automation is a pivotal force that’s reshaping the landscape of business transactions. This advancement has not only streamlined traditional paper processes, it bolsters security measures, enhances supplier relationships, mitigates risks, and saves a business money.
As organizations embrace and implement automated systems, the benefits are tangible: accelerated transaction speeds, reduced manual labor, enhanced decision-making, and improved cash flow management.
As B2B payments technology continues its trajectory, it promises further innovations that will revolutionize the way businesses transact, collaborate, and thrive in an increasingly interconnected marketplace.
There are so many options for paying suppliers, especially if you’re doing business on an international basis. Get started today with Tipalti’s ebook, Comparing the Top Global Payment Methods.