Businesses depend on their suppliers. The days of vertical integration are long gone: few if any firms today can manage everything in-house for their customers. In fact, it’s not uncommon to see multi-nationals with as many as tens or even hundreds of thousands of suppliers. But there are challenges. What happens when legacy payment processes meet modern supply chains? The result can be mistakes and delays — friction which threatens to harm key relationships and even impact the end-customer experience.
To mitigate this risk, finance leaders need to focus on streamlining B2B payments with innovative new alternatives. It could be the difference between success and failure.
Gaining an advantage
Most finance chiefs may have a hard time putting a figure on how many suppliers their organisation has. Yet this complex and diverse ecosystem of third-party firms is vital to business success. For retailers, it means having products to stack on the shelves. For manufacturers, it means the supply of key components and raw materials to turn into products. For insurers it could be a huge range of businesses, from car mechanics to dentists, who are needed carry out treatment/works for the policyholder.
The bottom line is that your relationships with these suppliers matter. Creating a good supplier experience is arguably as important as creating a good customer experience and the payments experience should sit right at the top of the priority list. Companies that pay accurately and on time will get the most out of their suppliers. It shows they value their business relationship and the service or goods provided — there’s no better motivator than that.
On the other hand, add too much friction to the payment process and these businesses may turn their attention towards more favoured clients. This makes supplier payments a key battleground on which can be won and lost competitive advantage.
Making it happen
The problem with legacy payments is that they’re time-consuming, inefficient and prone to manual error. An Optal survey of FTSE 350 finance leaders found that half (49%) admitted making supplier payment mistakes. On average, large organisations are misdirecting payments worth £3m each year, while an estimated £40bn is paid late.
It doesn’t need to be this way. New B2B payment platforms introduce digital innovation to a sector crying out for more streamlined, optimised ways to pay. Virtual Account Numbers (VANs) offer one such option. These 16-digit, single-use card numbers can be used to pay suppliers in a fast, secure and highly automated manner. Reconciliation is automatic and immediate and the cash is in supplier bank accounts before cheques or bank transfers. Enriched data can also be added to each transaction to improve reconciliation, auditability and reduce fraud risk.
VANs can remove friction from supplier payments by:
- Providing certainty to suppliers that payments will be made accurately on time
- Removing any admin overheads associated with reconciliation, cashing cheques etc.
- Reducing the risk of card or cheque fraud
- Providing suppliers with the freedom to change their banking arrangements without impacting payments
To find out more, read Optal’s new eGuide to Alternative Payments.