There’s plenty to keep today’s finance leaders awake at night. In this context, routine tasks like payments need to just work. But unfortunately, that’s often not how things pan out. In fact, thanks to the inadequacies of legacy processes, disputes can occur between buyers and their suppliers which require extra time and resources to resolve. The cumulative effect of these disputes, and the ill-will generated with suppliers, can be a major block on productivity and growth. It can hit margins and may even lead to greater fraud losses.
The answer is to invest in digital platforms which provide improved visibility and control for finance teams, reducing risk and ensuring payments get delivered directly, on time, and to their intended recipients.
Manual errors mean extra work
Disputes usually arise because of the manual, error-prone nature of traditional B2B payment processes. There are typically two types of B2B payment dispute. The first involves a buyer raising questions over a supplier invoice. It might be that there’s an error in the invoice, it was sent to the wrong department, or even that the goods/services delivered were not up to scratch or didn’t arrive.
Invoice issues are common. In an Optal poll of FTSE 350 finance leaders, over a third (38%) admitted that up to 40% of invoices from their suppliers require some kind of follow-up interaction due to disputes, suppliers chasing money, or other reasons. In nearly half (49%) of these cases, this requires the involvement of between one and five staff members.
In the second scenario, the supplier has an issue with the buyer’s payment, either because it hasn’t been received, it’s for the wrong amount, or even that it’s been intercepted by fraudsters. Sometimes the supplier is not able to identify if they’ve been paid correctly or not because there’s not enough reference data accompanying the payment. This is especially true for invoices with multiple items, or multiple invoices paid together. Optal found that almost half (49%) of FTSE 350 organisations made supplier payment mistakes on occasion.
All of which raises several key challenges for finance leaders:
- Getting payment reference data correct, keeping it up-to-date and secure
- Adding more information to the payment transaction so suppliers know what they have been paid for
- Gaining visibility into the status of transactions once they’ve left the corporate account, so supplier queries can be handled quickly
- Minimising the extra cost and risk of funds going awry: for payments using bank transfer the sender is legally liable
Eliminating disputes with VANs
Fortunately, there are digital payment alternatives to cheques and bank transfers which take the pain out of payments and minimise the chance of disputes. Virtual Account Numbers (VANs) are single-use, 16-digit card numbers that can be used to pay suppliers seamlessly.
- Allow buyers to add supplier reference info like PO and invoice numbers to the transaction so they know exactly what they’ve been paid for;
- Offer transaction status info so buyers know when payment has been received;
- Offer the supplier immediate and guaranteed payment;
- Provide a solution free from manual error;
- Enable recovery of some or all of the payment amount in the event of faulty/poor service or goods never arriving, via the chargeback process.
Best of all, by eliminating disputes via seamless, accurate digital payments, organisations can preserve important supply chain relationships and focus on their most important task — growing the business.
To find out more on how VANs could transform your payment processes, read Optal’s latest report, Do you have a VAN plan?