The complexities of B2B transactions make it very difficult to provide a simple and convenient method to accept e-payments. Here's a look at the challenges businesses may experience when looking to transition to electronic payments.
I was cleaning out the top drawer of my dresser the other day and came across a sealed box of check books. Isn’t it amazing how the world has changed to a point where in our personal lives we pay for nearly everything electronically? I rarely visit the bank to get cash, and truly can’t recall the last time I wrote a check (as evidenced through the untouched bank of checks I found tucked behind my socks). So, if paying electronically is the norm in our personal lives, why is it so different in our professional lives?
While many companies recognize the value of electronic payments (the benefits of which include automated cash application, faster settlement, and more visibility), they have generally failed to materially change how their customers pay them. Writing paper checks is still the most common form of payment in B2B. Further, when business customers actually do pay electronically, it is likely that they are pushing the payment from their bank via ACH or EFT without the valuable remittance data (i.e. naked payments) needed for the billing company to realize the benefits. The challenge all boils down to convenience.
In our personal lives it is simple and convenient to pay for goods and services at the point-of-sale (POS) or through an e-commerce portal because as consumers, we are typically making simple purchases and paying at the time of purchase. Conversely, B2B transactions are more complex and often involve:
• Payments coming well after receipt of goods and services (i.e. sales on credit, usually net 30 or net 60)
• Disputes (e.g. damaged or incorrect shipments) that require adjustments to invoiced amounts
• Credit memos on account from previous transactions
• Discounts and rebates
Many B2B companies have attempted to implement and offer e-payment portals for their customers to pay electronically while capturing remittance data at the time of payment. In fact, most of the major banks are now offering e-payment portal solutions (usually called Integrated Receivables, iReceivables, Automated Receivables, EIPP, etc.) to their business clients. This can work well for straight forward transactions. In practice, however, the adoption by customers often falls well short of expectations (typically 10-20%). The two primary reasons for the shortfall are:
1. Convenience and ease of use
E-Payment portals typically have no means to direct and funnel customers to the portal in the first place. Rather, they are implemented by the billing organization and put out there with fingers crossed and the hope that customers will find and use them.
2. Lack of functionality
E-Payment portals typically lack the capabilities to manage the complex nature of B2B transactions, as detailed above. For example, the capabilities to apply credit memos and discounts against an invoice, or make short pays based on circumstances like incomplete shipments of goods received, are often missing.
At Versapay we take a different approach to e-payment portals that drives substantially higher adoption. By integrating upstream activities like invoicing, dispute resolution, and collections, the Versapay solution continuously directs your customers back to a convenient and easy-to-use payment interface. Further, we have built capabilities into our platform to manage the complexities of B2B transactions including credit memos, discounts and short pays, allowing B2B organizations to toss their check books for good.