Payment automation can radically transform your business payments, helping you to settle your bills on time. This leads to improved relationships with your suppliers, reduced fraud risks, and cost savings. Yet, a lot of businesses are stuck with manual processes, which are not only tedious and less effective, but costly as well. According to recent research, almost 50% of small and medium businesses in Europe still use some form of manual processes in their invoicing and payments. Only 10 percent of European SMEs are fully digitized in their payments. 85% of B2B payments still retain some form of manual work. In this article, we break down what payment automation is and why it is essential for all businesses.
What is payment automation?
Payment automation is the use of digital technologies in your B2B payments. This means to automate all tasks related to billing and payments made to your vendors and suppliers. This includes tasks such as raising, processing and matching invoices to payment approvals, scheduling, processing, and final settlement. These tasks can be performed manually, but are prone to human error, leading to payment delays, and wastage of time and resources. What payment automation does is that it makes these process automatic, removing the possibility of human error. This, in turn, streamlines and improves your billing and payment processes. Plus, timely payment ensures the products/ services you have purchased are delivered to you on time. Payment automation ensures your vendor payments are accurate and timely, thus improving your relations with your vendors.
Why payment automation?
Cash flow is the lifeblood of any business, particularly smaller ones. Payment automation helps you pay suppliers on time, making it easier for them to beat rising costs and stay operational. B2B payments are often recurring, with higher order values, longer approval processes, and buy-ins from multiple stakeholders. These make the whole process complicated. Relying on legacy systems and processes lead to error and inaccuracies, which impact everyone down the chain. Payment automation helps businesses achieve higher efficiency, transparency, and speed in their payments.
How does payment automation work?
Payment automation works by making all manual tasks within your accounts payable (AP) process automatic. This includes a wide range of tasks – from raising, processing and matching invoices to payment approvals, scheduling, processing, and final settlement. The invoicing process involves multiple steps:
- Collecting invoices from different vendors in different formats and evaluating them,
- Storing the payment data contained within (such as bank account details, invoice number, etc.),
- Approving the invoices, whether online or manually.
This is a drawn-out process with multiple complexities. The larger the organization, the longer the approval and buy-in process. Not to mention, the time and effort spent on correcting errors and inaccuracies.
Payment automation tools help you to easily control, schedule, and track payments from a single dashboard. They give you better visibility into your accounts payables, and helps you settle your payments easily, from anywhere, anytime.
What are the benefits of payment automation?
1. Faster Payments Cycle
For accounts payable (AP) teams, time is money. The lesser time spent on manual work means resources can be aligned to more important tasks. Using payment automation removes manual work, inaccuracies, and human error. This leads to faster and more efficient payments. Faster payment to vendors also helps you to avail early payment discounts. This results in cost savings and happy suppliers.
2. Lesser Costs per Transaction
Using payment automation helps you digitize your payments. You can easily make payments through digital methods such as wire transfers, virtual cards, or e-wallets. Electronic payments turn out to be cheaper per transaction, compared to traditional methods like paper checks. This can lead to significant savings when you consider a large volume of business payments.
3. Higher Fraud Protection
Using legacy methods like paper checks (or cash) open you up to fraud risk. Compared to electronic payments (like a bank transfer or e-wallet such as PayPal), paper checks are three time more likely to be targeted by fraudsters. Checks can get lost or stolen, increasing the risk of fraud. Payment automation can help reduce fraud in multiple ways. One, it lets you pay your vendors through electronic channels rather than checks, thus eliminating the chance of check fraud. Payment automation also reduces invoice fraud, since they use invoice matching methods. This helps you align your invoice details against purchase orders, and only approve those invoices which are matched to genuine purchases and suppliers.
4. Lesser Errors and Duplicate Payments
Payment automation reduces the chances of human error that lead to input errors, duplicate payments, or missed payments. Errors can lead to waste of time and resources, unwanted delays, incorrect books, and strained vendors relations.
5. Higher Visibility into Payments Data
Payment automation and electronic payments help businesses capture richer payments data. This data ca be analyzed to draw insights that help you improve your processes and become more efficient. Higher visibility and deep insights also help you forecast your cash flow and plan your operations in a better way. Thus, you can improve your cash position, finance your supply chain, and avail dynamic discounting.
Also read: How to Use Data for Better Payments
6. Higher Vendor Satisfaction
Payment automation results in shorter payment cycles, which means your vendors and suppliers get paid faster. This helps you forge stronger relations with your supplier base. AP teams also spend a lot of time fielding queries from suppliers on invoice and payment status. By automating this process and setting up a self-service portal, AP teams can save time and effort. Vendors can use the self-service portal to get quick response on their queries, leading to higher satisfaction.
How Can Novalnet Help?
If you are ready to start you payment automation journey, we can help you. Novalnet is a global PSP, trusted by Europe’s leading brands to handle their payments. Our state-of-the-art technologies and methods help you accept payments globally. From our instant payment plug-ins to our AI-based risk management tools, we have the resources to get your payments up and running in no time, and with zero hassle.
Reach out to us today to know more.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.