The business-to-business (B2B) payments sector is undergoing a transformation as traditional manual processes strain business relationships.
Lengthy payment cycles, inefficient communication, and error-prone methods are particularly challenging for small and medium-sized businesses (SMBs) that rely on timely payments. The demand for efficiency and trust necessitates adopting automated and digital solutions.
In response, businesses are adopting automation, virtual cards and digital payments. These innovations enhance cash flow, reduce costs, and improve customer experiences. Embracing these technologies helps companies strengthen supplier relationships, streamline operations, and stay competitive in the evolving digital landscape.
A recent PYMNTS Intelligence report, “Building Better B2B Relationships Through Payments Innovation,” in collaboration with American Express, explores challenges and solutions in B2B payments, emphasizing the role of automation and real-time payments. It examines how digital payment methods are reshaping interactions between buyers and suppliers, detailing the shift from manual processes to modern, consumer-like payment experiences. The analysis offers insights on enhancing payment strategies to strengthen and streamline B2B relationships.
In the landscape of B2B transactions, inefficiencies in manual payments are straining relationships and disrupting cash flow. As of 2023, a troubling 42% of businesses reported an average days sales outstanding (DSO) exceeding 60 days, nearly doubling the previous year’s figures.
These delays intensified using paper checks and manual accounting, often drive SMBs to seek alternative working capital sources. This reliance can strain business relationships and increase the likelihood of operational disruptions.
In 2024, more than 80% of executives say they’ve lost business because of a payment process miscommunication. More than half say it’s happened on more than one occasion.
The traditional approach to accounts payable (AP) and accounts receivable (AR) is failing to meet the demands of today’s business environment. Legacy systems are cumbersome and hinder effective communication between buyers and suppliers. More than 80% of SMBs acknowledge the critical role of automation in managing daily financial tasks, yet manual processes continue to dominate. These outdated methods create a bottleneck in financial management, jeopardizing timely payments and risking long-term business relationships.
Automation, virtual cards and digital payments are recognized as vital components of modern B2B transactions. Automation bridges gaps between AR and AP teams, facilitating better communication and reducing disputes. According to a 2023 study, disputes and communication breakdowns between B2B partners lead to an average of $4 million in outstanding invoices per mid-sized company each month. Automation can mitigate these issues by offering real-time communication and streamlined payment processes.
Real-time payments are becoming a key preference among businesses, with 66% of SMB receivers expressing a strong preference for this method. The demand is particularly high among freelancers and contractors, with 81% favoring instant payments. Enterprises are responding by integrating real-time payment options, recognizing that 58% of payers view payee satisfaction as a primary motivation for offering these services. This shift toward instant payments is crucial for maintaining a competitive advantage and building stronger B2B relationships.
The “consumerization” of B2B payments reflects a broader trend toward enhancing the payment experience for business partners. As digital payment methods become more sophisticated in the consumer realm, B2B transactions are also evolving. Nearly 40% of firms still rely on paper checks, highlighting an opportunity for modernization. Innovations such as virtual cards and digital wallets are improving transaction efficiency and overall partner satisfaction.
Research indicates that 84% of manufacturers receiving real-time payments report stronger buyer-supplier relationships. This sentiment is echoed across various industries, with real-time payments proving to be a pivotal factor in fostering trust and collaboration. As businesses increasingly prioritize digital and efficient payment methods, those that embrace these innovations are better positioned to build lasting, profitable relationships with their B2B partners.
By adopting automation and real-time payment solutions, companies can transform the traditional B2B payment landscape, turning challenges into opportunities for growth and improved business relationships.
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