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B2B’s Shift to Digital Payments Drives Healthier Balance Sheet.


Whether the spate of back-office changes was forced, rushed or a long time coming, the ongoing shift to digital business payments has seen companies of all sizes come to appreciate the broader benefit their conversions have set in motion.

Survey feedback shows a sizable majority of chief financial officers believe the greatest benefit of the digital shift is a healthier balance sheet, made possible by faster payments and the greater clarity they provide.

Matt Clark, president and COO at Corcentric, told PYMNTS’ Karen Webster in an interview that CFOs were quick to realize that with all the different payment modalities and timing strategies they’re seeing from their customer base, there’s an opportunity to create newer strategies. By better optimizing cash flow, they can put more working capital in their company’s hands.

“On the surface many of the things they do might seem like little turns of the dial, but for larger companies with larger dollars at play, these can become major game-changers,” Clark said.

Connecting the Dots and Dollars

Clark said CFOs have come to learn that the entire transaction lifecycle needs to be optimized in order to determine what happens with the back-end payments that finalize each transaction. Previously, payments were seen almost as an independent thing that happens at the very end of the transaction.

“They’re seeing the connection, or the things that influence a transaction on the front end, leading to more optimized strategies for how payments are done on the back end, and they’re trying to put them together in a more collaborative way,” Clark said.

That collaboration is something new, and it’s occurring in pursuit of a healthier balance sheet. Before the pandemic, buyers and suppliers largely did their own thing, trying to implement solutions and strategies that benefited themselves without thinking about the businesses they had to transact with, Clark said. But now, he explained, companies are increasingly realizing they need to collaborate with those they do business with, throughout the entire transaction lifecycle, to create more desirable outcomes for both parties. The realization has become so strong that when the two parties are unable to agree on something, there’s more willingness to seek out third parties, or middlemen such as Corcentric, that can mediate to find agreeable solutions, Clark said.

Clark believes middlemen can play a key role in understanding the differing motivations of buyers and suppliers and trying to reconcile them.

“Suppliers want to get paid faster and buyers want to pay slower. And then you get situations where a buyer might want to use a virtual card or some payment modality that the supplier might have trouble digesting,” Clark said. “So companies are bringing in a third party to kind of mediate and look for an opportunity where there might be a tradeoff. Then they can find a way for the supplier to get paid faster in exchange for accepting a certain payment modality, while also keeping the buyers’ situation intact and not impacting them too dramatically from a cash flow perspective.”

Unexpected Benefits

It’s not only faster payments that make suppliers’ balance sheets healthier. Going digital, many businesses have found they gain more visibility too, leading to more clarity over exactly when they’ll get paid. With increased visibility it also becomes much easier to reconcile payments received with each transaction.

“A lot of progress has been made, especially on the supplier side, in terms of visibility into how each payment is going to be made and where it is in the lifecycle,” Clark said. “That has been a huge challenge in the past. Companies would get a huge lump of money hitting their bank account, and while that’s great, they struggled to reconcile that against what the money was intended to pay for.”

Not every business has been successful in optimizing their payments workflows though. Clark said this is because a lot of companies approach the problem in the wrong way.

“Sometimes it’s attacked somewhat myopically and it’s also somewhat theoretical in terms of what they’re trying to do,” he said.

A much more considered approach is needed, Clark said. He points out that most companies have no shortage of data that can be used to formulate a successful strategy. The first thing to do is to understand what the current situation looks like in terms of how customers are paying, and what kinds of things would really make a difference. Then, it becomes possible to pinpoint the outcomes that can be achieved by improving on certain metrics and move toward those outcomes.

“I always recommend diagnosing before you prescribe. First, let’s understand where you’re at today,” Clark said. “Then we can figure out what strategies we can employ to move toward those outcomes. That becomes the motivator to move toward a strategy that will have you focusing on the things that are really going to need move the needle.”


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