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How Collaborative Accounts Receivable Abolishes Payment Miscommunications and Enhances Customer Lifetime Value

  • 7 min read

It’s a simple formula: happy customers will continue to buy from you and unhappy customers will take their business elsewhere. When it comes to the accounts receivable, however, it often seems this maxim is overlooked.

In this blog, learn why collaborative accounts receivable is the key to enhancing the B2B payment experience and boosting customer lifetime value.

Person walking with briefcase, behind them is a stylized web page, with a credit card on it

As you step into Woody’s Coffee Shop, the earthy aroma of their world-renowned blends makes you close your eyes and sigh. You now see why there’s often a line around the block. In fact, you’ve been in it for 20 minutes. It’s a relief to finally get in the door.

While you’re taking in the delicious smells, you can’t help but notice that the customers walking out with coffee in hand don’t look so happy. Neither do the folks behind the counter. You begin to observe how service works at Woody’s.

When it’s your turn to order, your barista writes your name on a cup (never mind that it’s spelled incorrectly), then barks out the order to a busy coworker. You pay the exorbitant $8.50 for what you hope will be the best cup of coffee you’ve ever had.

And then you wait. And watch as the baristas struggle to keep track of orders.

When you finally get your order, you know that even if it truly is the best coffee you’ve ever had, you likely won’t be back.

The payment experience matters just as much as the products or services themselves

We collaborated with Wakefield Research to survey over 1,000 c-level executives at companies with a minimum annual revenue of $100 million USD about their accounts receivable (AR) digitization efforts. This research uncovered some alarming findings on the impact subpar payment experiences have on overall customer experience (CX):

82% of respondents reported that their organization has lost work due to miscommunication in the payment phase. 42% said this has happened multiple times.

What’s more, 73% of respondents admitted that the invoice-to-cash process can negatively affect their customers’ experience.

Meanwhile, business customers are definitely feeling the effects.

PYMNTS’ Global B2B Payments Playbook found that 85% of B2B buyers value a positive experience with their partners as much as their products and services. Just like your unpleasant time at Woody’s, a B2B customer’s payment experience has a big impact on whether they choose to continue doing business with a vendor.

This won’t come as a surprise to most accounts receivable professionals, as the traditional B2B payment experience is not a particularly efficient one:

  • Many businesses still depend on paper checks and invoices, lagging far behind the consumer payment experience

  • Multiple people and technology systems are involved between the seller’s AR team and the buyer’s accounts payable (AP) team, which can lead to miscommunications and inefficiencies

  • When invoice and remittance discrepancies occur, it’s an arduous, and often long, process to sort out the details

Customers may be willing to stop doing business with a vendor because of a negative payment experience, which lowers customer lifetime value.

What is customer lifetime value (CLV)?

Customer lifetime value is a common business metric that measures how much a company can expect to earn from an average customer over the course of their business relationship. This forecasting tool helps organizations make strategic business decisions based on the annual revenue they’ll earn by keeping current customers satisfied and loyal over time.

To enjoy a profitable CLV, businesses need to provide high-quality customer service, from order to fulfillment. And for many B2B businesses, the payment process is a major thorn in the customer experience.

Miscommunication is the main culprit behind negative B2B payment experiences

When it comes to the B2B payment process, communication is everything. Miscues when communicating with clients during the invoice-to-cash cycle can have a very real impact on an organization’s bottom line.

The executives we surveyed were clear:

  • 85% said miscommunications between AR and customers have resulted in a customer not paying in full. More than a third (35%) said it has happened multiple times
  • 78% said they encounter payment conflicts that could have been avoided with better communication sometimes or more often; 44% said these disputes happen often or all the time

  • 65% reported that better transparency and collaboration between their AR department and their customers would reduce the number of invoice disputes their company faces

In the traditional B2B payment process, there are many ways communication can go south. Manual AR processes mean there’s often a disconnect between suppliers and customers at various points during the invoice-to-cash process. Common examples include:

  • An invoice being sent to the wrong person or getting locked in the inbox of someone who’s left the company or has gone on vacation

  • A discrepancy within an invoice with no backup documentation to help support one side or the other

  • Missing or incomplete remittance advice

  • Inefficient communication methods (email and phone) that make it difficult to keep track of details and conversations

Forrester recently released a report on B2B payment technology innovations that predicts the focus of payments innovation will shift from consumers to businesses over the next 10 years. “Corporate as well as small-and medium-sized businesses will pay to alleviate friction from arcane processes and legacy B2B payments,” their principal analysts write.

Collaborative AR is the key to enhancing the B2B payment experience and improving customer lifetime value

Many of the communication issues plaguing the B2B payment process can be cured with a collaborative AR solution. This kind of platform (like Versapay) takes traditional AR automation a step further by better enabling buyers and suppliers to collaborate over the cloud. The results are greater AR efficiencies, faster cash flow, and drastically improved customer experience.

There are three main ways collaborative AR achieves this:

1. Providing transparency and visibility into shared data

When suppliers’ AR team and buyers’ AP team can see all the same data and documentation in one place, this instantly levels the communications playing field.

Customers’ AP teams can log into their customer portal to see their account status, balance due, outstanding invoices, available credits, and payment history.

Meanwhile, suppliers also have access to this information, bringing AR and AP teams together on the same (virtual) page.

The result? By giving customers the ability to self-service, you’ll get fewer questions coming into your AR department, resulting in faster payments.

2. Bringing communication into one shared space

A collaborative AR automation platform allows suppliers and customers to communicate in the same place where invoices and payment information are stored. Instead of long email chains and phone calls, questions can be resolved right in the portal.

Because you can preserve the history of all customer conversations in the platform, it’s easy for AR team members to see how things have evolved or were resolved over time. No more chasing down information in email threads, phone call notes, or disparate documents.

3. Providing space for AR and AP teams to collaborate

With all the information they need at their fingertips, AR and AP team members on both sides of a transaction can work together to solve problems, resolve discrepancies, and validate information in real time.

This kind of collaboration not only slashes inefficiencies and drives faster payments, but also fixes recurring AR challenges.

For example, if an AR team member receives a check for $5,000 and isn’t sure which invoice to apply it to, it’s easy for them to hop in the portal and ask the customer’s AP team directly. It’s equally easy for the buyer’s AP team to request clarification or raise a dispute on an invoice and make a short payment.

With collaborative AR, the billing and payment process is now a pleasant experience for customers. When it’s easy to work with you, your customers are more likely to keep you as a supplier, leading to profitable CLV numbers.

Versapay customers who’ve adopted our collaborative accounts receivable platform have experienced:

  • 50% less time managing receivables

  • 25% increase in speed of payment

  • 30% decrease in past-due invoices

  • 81% end customer adoption rate

Don’t be a Woody’s Coffee Shop

Your B2B business deals with higher value payments than Woody’s Coffee Shop, but when you consider the fact that today’s buyers have a lot of choosing power, all it takes is one bad customer experience to lose a significant source of revenue. It’s high time B2B businesses asked themselves whether they’re providing their customers a delightful or frustrating payment experience.

As the executives we surveyed recognized, it’s not enough to provide great goods and services. B2B customers expect all aspects of their experience to be efficient and pleasant—and the payment process is no exception.

Want to see what collaborative AR looks like in practice? Check out our on-demand webinar, “What Collaborative AR Really Means to Your Business.”

About the author

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Heather Hudson

Heather Hudson is a Toronto-based journalist and writer who specializes in writing compelling content for SaaS businesses, particularly in fintech and personal finance.

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