How to master the 3 most important challenges in business payments

By Sven Hinrichsen.

Working with multiple systems, increasing risk of fraud and lack of transparency of data are the top three challenges treasury professionals face when it comes to business payments. That’s according to Strategic Treasurer’s 2022 Global Payments Survey of more than 230 treasury and payments professionals.

These challenges are not surprising. The pandemic has brought the digitization push into full swing. However, adding more electronic payment methods and digital systems adds more workflows and different data sources to an already complex process. At the same time, the rise in ACH payments has fueled a new wave of sophisticated business email compromise schemes. With so many people changing jobs since the pandemic, these challenges are even more acute now.

Perhaps surprisingly, these concerns have risen to become the “top challenge” for businesses far more often than concerns like maximizing card discounts and supplier discounts, and using different payment methods to optimize working capital.

These are still important, but nowhere near as important as ensuring the day-to-day payment management process runs smoothly. These findings from the study are consistent with the top challenges we see when working with treasury and payments professionals.

Challenge 1: Using multiple systems

The biggest challenge cited by 58% of respondents is working with multiple systems. This is difficult when systems are not fully integrated, and only 5% of respondents indicated that their ERP system was fully integrated with their banking platforms. Almost 90% said there was some integration, while 21% said their ERP system is not connected to their banking platforms at all.

What we’re seeing is teams with systems that aren’t fully integrated running overlapping processes. You switch between systems and export data from one system to a spreadsheet and manually upload it to another system.

At the same time, they manage a different workflow for each payment method or program. More than 80% of respondents arrange payments with more than one bank. More than 75% use bank portals for payment connectivity, and 48% cite banks’ complex formatting requirements as a challenge.

Challenge 2. Security and Fraud Management

Fraud prevention is a greater challenge for smaller businesses, with 55% citing this as a top concern compared to 36% of those in large organizations. We’re seeing smaller businesses being hit more often by these email-based attacks, likely because their systems and processes just can’t keep up with the scammers’ pace of innovation. The fear of an attack is greater because the impact on a smaller organization is much greater.

A larger company with a large balance sheet may be more resilient to a fraudulent attack, but it can be a real pain for a smaller company. At Corpay, we have processes in place to help our customers recover fraudulent payments. Many small businesses cannot afford to be without their money for that long.

Challenge 3: Access accurate real-time data

Getting real-time insight into payment data seems to have become more important, with 43% of respondents saying it’s one of the top challenges. This is perhaps a sign of changing expectations in an increasingly digitized world. Not long ago, most seller payments were made by paper check. In this world, real-time visibility was just a pipe dream.

As the rest of the organization goes digital and decision-making becomes more data-driven, the demand for more timely financial data increases.

But the challenge isn’t limited to slower reporting. Reconciliation takes longer, which means job costing takes longer. In industries like construction, where costs are passed on to the customer, this means billing is delayed. This in turn creates challenges in cash management.

It is interesting to what extent the top 3 challenges are linked. It’s difficult to deliver accurate data in a timely manner when you’re working with multiple systems and there’s no standardization. The complexity that people manage creates constant time pressure and gives scammers the opportunity to sneak in. Additionally, lagging data can prevent daily reconciliation, which is one of the best methods for detecting and recovering from fraudulent transactions.

The connection between these challenges suggests that the same solution can eliminate many of them. Companies seem to be moving in this direction. Key investment areas are accounts payable automation, which could include invoice and/or payment automation and payment services.

Payment automation enables customers to combine different payment processes and bank details into a single workflow. AP only has to send one file to the payment provider and receives back standardized transfer data. With the help of APIs, the file transfer can be initiated from the ERP system and the transfer data land directly there again.

Payment services outsourcing is a more robust solution that includes automation, vendor enablement, and data management within a B2B payments network. Payment service providers also take care of time-consuming backend issues like debugging and escrow. What we typically see with customers who choose the outsourcing route is a 75-80% reduction in the time spent processing payments.

There’s a lot of talk in the industry about moving accounts payable from a cost center to a profit center by increasing credit card rebates. The promise of big discounts on spending you’re already making is attractive. But if your processes are still largely manual and you need to hire additional staff to run the process, it can easily wipe out profits. And it doesn’t enable your organization to scale.

The responses to this survey make it clear that the first task is to ensure that the process is actually working at scale, reliably and with the necessary protection and transparency. Solutions that treat supplier payments holistically while streamlining complex processes, reducing the risk of fraud and giving you insight into the status of all your payments. This, in turn, improves your ability to manage working capital, receive rebates, and make more credit card payments, increasing rebates and helping you meet your cost reduction goals.

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Sven Hinrichsen is SVP of Strategy for Corporate Payables, which enables companies to spend less through smarter payment methods

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