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Research finds the complexity of B2B payments is holding back large organisations

Large organisations are saddled with complex, time consuming and manual B2B payments processes which lead to high error and failure rates, expose them to security risk and add unnecessary extra cost, according to a new study from Optal.

One of the leading experts in optimising B2B transactions, Optal commissioned Davies Hickman to poll over 100 finance decision makers in some of the UK’s top public and private sector organisations, 94% of which have 1000+ employees.

The interviews revealed that organisations are continually inundated with invoices from a large network of suppliers, but that existing payment mechanisms are poorly set-up to handle these challenges.

Complexities of payments

Half of the respondents have more than 500 suppliers, while a third (32%) are dealing with more than 2,000 on a regular basis. Over two-fifths (44%) said they received more than 2,000 invoices each month that needed to be processed and paid on time.

These organisations are dealing with significant sums: over a third (38%) claimed they spend between £20m and £249m each month with their suppliers.

The picture is further complicated by the high volumes of overseas payments many organisations need to process. Over half (59%) of those interviewed for the report claimed that up to 20% of monthly B2B transactions involve foreign exchange payments.

BACS was by far the most popular payment type, with 91% claiming they use the legacy clearing system most often to make B2B transactions, although large numbers also said they make payments more than four times per month via SWIFT (50%), cheques (45%) and faster payments (52%).

A high failure rate

The research uncovered several problems associated with the payment of these supplier invoices.

Over a third (38%) of organisations 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 — adding extra time to the already lengthy B2B payments process.

In nearly half (49%) of all cases, this requires the involvement of between one and five staff members. Incredibly, for 16% of respondents it requires more than 36 people — human resources which could better be spent on growing the business.

Error rates are also high when it comes to payments: every single respondent in telecoms; travel & leisure; oil & gas; pharmaceuticals & biotech; and house, leisure & personal goods sectors admitted misdirecting or duplicating payments to suppliers.

Overall, almost half (49%) of organisations admitted making these supplier payment mistakes on occasion.

This inefficiency not only adds to the time spent processing payments but also the cost. On average, large organisations are misdirecting payments worth £3m each year and a staggering £40bn is paid late — potentially damaging relationships with suppliers.

These errors, misdirected payments and inefficient manual processes are also having a major impact on reconciliation. Some 11% of organisations had 50 or more employees dedicated to this process, spending a cumulative £50m. Given the huge resources currently being devoted to this, it’s unsurprising that a majority of respondents (57%) were attracted to the prospect of faster reconciliations.

The security challenge

The security of payment data is an ever-present challenge to organisations, especially in light of increasing media stories around breaches and payment fraud and the highly regulated nature of the industry.

This partially explains why one of the top five frustrations finance executives in large organisations gave was keeping and maintaining details of supplier payment accounts. In addition, 88% of large organisations make overseas payments, increasing the need for them to hold unfamiliar data and the chances of security breaches.

Over half of respondents (53%) said they like the idea of reduced supplier on-boarding data capture and better maintenance of data.

“Finance experts in some of the UK’s top organisations told us they choose payment methods for reasons of cost, ease, speed and security. Yet this research clearly shows current processes for B2B transactions are letting them down”

Andrew Downes, General Manager at Optal

“The high failure rate on first-time payment of invoices not only impacts the productivity of finance teams and hits the bottom line hard, but it can have a detrimental effect on supplier relationships. Yet misdirected and duplicate payments can be a thing of the past if more organisations consider innovative solutions such as one-time generated Virtual Account Numbers (VANs). Such systems strip away cost, complexity and human error to streamline payments and provide a solid foundation for business growth.”

Contact details:

Bradley Eccleshare
Chief Marketing Officer

M +44 0 7525 929198
T +44 0 20 3892 4928

About Optal Ltd

Optal is re-inventing how payment processes work across complex industries. By stripping payment processes of their customary inefficiency, Optal helps companies boost profitability across a growing number of sectors around the world.

Optal issues Mastercard branded payment products, driving its focus on developing and bringing to market, game-changing payment solutions. Optal’s working capital solution, Invapay, turns underutilised credit lines into a dynamic resource to manage cashflow.

“Invapay” and “Invapay solution” means Invapay Payment Solutions Limited, a private limited company in England and Wales, authorised and regulated as an Authorised Payment Institution by the Financial Conduct Authority under the Payment Services Regulations 2017 which is a wholly-owned subsidiary of Optal Limited.

Talk to us to discover how Optal can add value to your organisation.

General Enquiries: +44 (0)2038 924 928
Invapay Technical Support: +44 (0)1992 500 589


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