Intro:According to KPMG’s report on Understanding the Next Wave of Opportunity in B2B Payments, businesses think more about cash flow between supply chain issues, fluctuating interest rates, and recession worries. For many, the focus is working capital optimization, which means making the most of the money they have to run their operations. At the center of this focus are B2B (business-to-business) payments.

When you think about consumer payments, the big question is always, “How do I want to pay?” However, B2B payments are not just about how but also when you want to make or receive payments. As companies become more aware of this complexity, they’re integrating payment solutions into their broader financial processes, like accounts payable (AP), accounts receivable (AR), and supply chain finance (SCF).

Expanding B2B payments ecosystems to improve cash flow

Finance leaders are moving beyond simple payment processing. They are now using advanced technologies to optimize every part of their payment workflows. Some of the most commonly adopted tools include:

  • AP and AR automation: Streamlines invoicing and payment processes while reducing human error.
  • Spend management platforms: Helps businesses track expenses and manage supplier relations.
  • Supply Chain Finance (SCF): Assists businesses in managing their working capital by providing flexible financing options.

These systems also generate vast amounts of data, which can be a business goldmine. They provide insights into payment patterns, supplier reliability, and financial health. For instance, a company that can see all its incoming and outgoing payments in one place can spot inefficiencies or payment delays, helping it make smarter decisions.

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Data integration remains vital for businesses

Many businesses have their data scattered across various systems. One tool manages payments, another tracks invoices, and yet another handles expenses. When this data remains isolated, companies miss opportunities to use it more effectively.

By integrating B2B payment data with AP and AR systems, businesses can gain insights into:

  • Supplier and customer payment trends.
  • Areas where payment delays occur.
  • Opportunities to optimize payment terms and reduce costs.

Integrating a reliable payment system also clarifies the company’s overall financial health, which is crucial for stakeholders like investors and lenders.

Understanding supply chain finance and its benefits

Supply Chain Finance (SCF) helps businesses manage their working capital better. SCF allows companies to extend payment terms to their suppliers while ensuring those suppliers get paid faster. Here’s how it works:

  1. Order placement: The buyer places an order with the supplier.
  2. Invoice submission: After fulfilling the order, the supplier sends an invoice.
  3. Invoice verification: The buyer confirms the invoice and approves payment.
  4. Financing request: The supplier requests early payment from a financial institution.
  5. Financing approval: The institution reviews the request, checks the creditworthiness, and approves payment.
  6. Payment to supplier: The financial institution pays the supplier, and the buyer later settles the balance with the financier.

The process benefits both the buyer and supplier. Suppliers get paid faster, and buyers can maintain their working capital longer. Additionally, businesses receive the following benefits:

  • Credit analytics: Detailed payment histories allow lenders to assess credit risk more accurately.
  • Risk reduction: Reliable data helps minimize the risk of non-payment or fraud.
  • Faster approvals: Automated systems can speed up the approval process, allowing suppliers to receive payments sooner.

One of the most exciting aspects of SCF is that it’s becoming more accessible to small and medium-sized businesses (SMBs). In the past, SCF was mainly available to large corporations because they had the resources to manage complex financial systems. However, with advancements in B2B payment solutions and data integration, even smaller businesses can now access SCF.

Building a holistic payment strategy

As B2B payments improve, businesses must decide which systems to adopt and how to integrate them. There are a few different approaches. We’ll highlight two:

  • Private equity roll-up: Private equity firms can acquire several specialized payment solution providers to create a more comprehensive offering.
  • Embedded finance partnerships: B2B payment providers can collaborate with industry platforms, allowing businesses to access integrated payment solutions directly through their existing tools.

The future of B2B payments is here, and it’s all about optimization. Businesses that embrace automation, data integration, and supply chain finance will have the edge in managing their working capital efficiently.

Opportunities exist for businesses of all sizes, and the time to act and improve your payments is now.

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