Identifying and solving key aspects of global payments friction via the 2022 Global Payment Survey
AP Automation Software Shouldn’t Stop at the Final Step: Payments
Developing an embedded payments distribution process via APIs can simplify your customers’ workloads, leading to incremental revenue growth as well as improving customer retention.
Across any enterprise, every business transaction involves a transfer of value. In simple terms, that value exchange is expressed — directly or indirectly, internally or externally — in monetary terms. The most common form of external value exchange involves a payment — either incoming as tracked in Account Receivables or outgoing as processed in Accounts Payable. Why then does AP automation software often stop at this most essential of business processes?
A recent review of Capterra’s software database found 148 Accounts Payable software vendors. Among them, 51 were found when a feature filter for “Check Writing” was applied. Can we infer then that most of these AP applications are limited to automating only the internal elements of a business process? What then happens to the actual payments? Are the payments simply reported upon or, if there’s an action like paying a supplier or contractor or even refunding a customer, that info is exported to be managed independently of the AP automation tools? Amongst the 51 is check-writing limited to placing data on a form, leaving the end-user the responsibility for managing the actual payment processing?
Perhaps a hint about just how ‘end-to-end’ the automaton is found using a few other filters: “Electronic Funds Transfer” found only 4 were reported as having that feature and “1099 Preparation” reported only a single instance.
Again, why is this? And what can be done to complete AP automation so that it can be fully automated, improving business performance to reduce costs and improve the end-customer experience?
Is it a problem of complexity? Surely, it’s not too difficult to develop a workflow that would incorporate the actual execution of payments to suppliers and contractors. Are there too many endpoints (i.e., banks) each with their own unique submission standards? A digital wallet for payees to connect to their own bank accounts would almost certainly reduce the administrative burden borne by the Accounting and/or Finance department staff, freeing them to tackle more strategic concerns. And almost any software ROI calculator could model substantial staff savings; perhaps enough to justify the entire AP solution expense.
Are there just too many payment methods to manage efficiently? Among the solutions with check-writing capabilities, it’s surprising that more don’t support or offer wire transfer, EFT and other payment option capabilities. Perhaps, it’s because international, cross-border payments are proving too difficult to manage. Almost certainly, this isn’t because they cannot create the data files. Rather, it’s more likely based on the limitations borne of not being a third-party money processor. Understandable, but not insurmountable.
Is it a matter of compliance? Actually completing a payment creates a relationship that can carry with it potential Know Your Customer (KYC), Anti-Money Laundering (AML), and tax reporting responsibilities. Understandably, that’s not the wheelhouse for most AP software companies. Handing the data back to the customer to finish the job can be the only safe route because, after all, it’s their supplier, contractor or customer.
While that may be understandable, it’s more an excuse than a customer-centric solution when there are payments platforms that can be embedded using APIs to complete the process at lower cost, greater efficiency and potential for significant customer savings — intelligent payments platforms that can execute the payments, offer payees choice of payments methods and manage compliance as part of a turn-key service.
As shown in the Capterra search above, there are a few AP software firms that are trying to incorporate payments into their solutions. And at least one that’s recognized that tax compliance reporting (e.g. 1099s) is important. For the others, there’s likely a roadmap with lots of future features to be considered — and payments may not be at the top of the list.
But consider this: not every customer or prospect puts payment functionality at the top of their AP software selection criteria but every customer has a payments process – and most are way too administratively burdensome.
Solving the customer’s problem is at the heart of any software solution, and it’s key to any customer retention strategy. Developing an embedded payments process via APIs isn’t difficult. More importantly, it can simplify your customers’ workloads and can lead to incremental revenue growth as well as improving customer retention.
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