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Executive Insight: Next-Gen in AP & AR Digitization

February 11, 2021

If your cash flow is strained these days, you are not alone.

Most businesses have experienced lower revenues and reduced profits because of the recession. Many say that customer demand is weak. Some businesses have seen their cash flow disrupted.

Get the playbook developed with PYMNTS to Accelerate your Cashflow

The Critical Role of Cash Flow Management

Cash flow insolvency is a real danger in this environment, especially for small and mid-sized businesses that don’t have big cash reserves that they draw down. Long before the pandemic, tens of thousands of businesses closed their doors each year in large part because of slow payments.

Slow payments can’t entirely be blamed on customers hoarding cash. Payment delays often are the result of inefficiencies in the way that businesses pay one another. Making business-to-business (B2B) payments today is unnecessarily complex, extremely time-consuming, and error-prone.

This is especially true when businesses pay suppliers with paper checks.

Payments Automation Through Digital Connection

But it doesn’t have to be this way. Account-to-account (A2A) payment solutions simplify and automate the exchange of payments and payments-related data between buyers and suppliers. The technology accomplishes this by digitally connecting buyers and suppliers through their banks and their enterprise resource planning (ERP) applications, while providing an online business directory.

When a supplier uses an A2A solution to receive payments, treasurers can have the confidence that:

  • it will be easy for customers to pay them electronically, without logging into a portal;
  • they will get paid on schedule, according to their payment preferences;
  • they will receive the enhanced data they need to apply cash quickly and accurately;
  • they will have fewer payment exceptions to manage; and
  • there is little chance that their payments will be intercepted by fraudsters.

In short, A2A solutions eliminate the friction in the payments lifecycle that delays cash flow.

As a result, suppliers can achieve lower Days Sales Outstanding (DSO) reduce aging balances, fewer customer disputes and write-offs, and less bad debit. Eliminating friction in the B2B payment lifecycle opens the door to accelerated payments through early payment discount opportunities.

This is music to a treasurer’s ears, regardless of the economic climate.

Ready to accelerate your company’s cash flow?

This playbook will help get you started.

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