As workforces shrink, B2B payment automation could grow

Business payments have traditionally relied on checks more than other transaction types, but a changing workforce and pressure to cut costs could lead to a wave of digitization in the coming months. 

"There will be a tailwind to get out of pen and paper to reduce the number of people who are managing payments," said Sunil Rajasekar, who in December was named CEO of Billtrust. "Companies will be thinking about how to get more efficient." 

Billtrust, which has reorganized its leadership since EQT X Fund took Billtrust private in December, plans to accelerate its move into emerging payment options such as real-time processing in the year ahead. Billtrust is not alone, as other firms that sell business software, such as Oracle NetSuite, have also upgraded accounts payable features. These firms are looking for businesses that want to streamline cash flow to blunt economic softness. 

The next year poses the possibility of stagflation, with many businesses bracing for impact, said Asaf Darash, CEO of Regpack, an online payment management platform.  

"As we have seen, layoffs and budget cuts are hitting multiple industries," Darash said. "That said, the service that remaining clients expect has been affected by rising prices and the shortage in personnel."

With smaller staffs, businesses can no longer spend significant time on account receivables, Darash said, adding this causes liquidity issues. Additionally, many companies do not allow clients to use software-as-a- service offerings without a valid payment method on file, pushing companies to use digital payments for technology purchases. 

"Companies will implement and introduce novel payment technology to remediate the effects of the slowdown," Darash said.  

Although Rajasekar does not have an established timeline for M&A activity at Billtrust he is anticipating more mergers and acquisitions  to take place across the industry in the next year due to economic pressures. That will create opportunities to reset accounts payable and accounts receivable operations at newly combined companies. "The companies will be looking to make integration easier, and payments is part of that," Rajasekar said

At the same time, companies may shrink their workforce based on the severity of any economic downturn. Technology companies shed thousands of jobs in 2022, and the new year has brought news of more job cuts. Combined with a hybrid office/at-home work environment at many firms, there will be fewer people to manage billing, procurement and supply chain finance.

"The work-from-home genie isn't going back in the bottle," Rajasekar said. "Digitizing payments makes it much easier to manage that." 

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The growth of real-time payments in the next year will also contribute to digitizing business payments, as The Clearing House's RTP network adds banks and the Federal Reserve's FedNow system launches.

"In this day and age, where profitability is king and cash is the emperor, getting money that is owed to you is a big deal," Rajasekar said. "Doing this through digitization and with fewer steps is needed to have happier customers and a better bottom line." 

The Oracle subsidiary NetSuite has upgraded its AP Automation platform by giving companies the option to upload vendor bills by emailing them directly to NetSuite. These bills are automatically processed to create digital versions, cutting down on manual input of bill details. The bills are scanned, and details such as the vendor's name, PO number, supplies ordered and pricing are converted to digital text. 

AP Automation's tweaks also include banking services from HSBC. When a payment is made from the payer's bank to a vendor, HSBC helps create a corresponding journal entry in NetSuite for that transaction, which also reduces manual entry. 

Other NetSuite updates include digitizing price changes for subscription renewals, updates to the technology that supports rebates and trade promotions, and increased controls around tax exemptions. 

"These businesses are dealing with a shortage of people," Scott Beaver, a senior product manager at Oracle NetSuite, adding AP Automation is designed for businesses that pay or receive about 100 bills or more a month and have a workforce that's more dispersed than in the past because of remote work. "They are looking for a better way to make a payment and make it in one place." 

Banks and payment companies have recently stepped up the pace in selling technology that automates B2B payments. Goldman Sachs has augmented its payment technology to address supply chain friction, while Citizens has added real-time billing and BNY Mellon has joined the Marco Polo trade finance and payments network. Capital One has partnered with the technology firm Melio to power supply-chain finance card payments for firms that use digital payments but get supplies from check-centric suppliers. And Mastercard has added artificial intelligence to improve payment processing. 

Integration and interoperability are the top priorities for B2B payments, which are complex involving multiple systems such as enterprise resource planning solutions, accounting platforms, electronic banking suites, and billing subscription systems, said Meng Liu, a senior analyst at Forrester. 

"A mixture of near-real-time and batch data is spread across silos, making it unlikely that data can be automatically reconciled," Liu said "Firms urgently need better integration and interoperability to enable end-to-end processing and unify systems, vendors, and technologies. This need spans most B2B payment augmentation technology categories, and many vendors are looking to address it via application programming interfaces."