B2B payment automation involves everything from the automation of capturing and processing invoices to making payments to vendors and reconciling those payments in your books. It allows your business to free up resources, reduce manual errors, and focus on more strategic tasks.
A 2018 report revealed that businesses in North America spend $187 billion annually on Accounts Payable (AP) processing, and labor accounts for over 90% of these costs. What if you could reduce these costs by 80% and increase the speed of processing invoices by up to 10 times? Sounds too good to be true?
With the right B2B payment automation software, it’s not. And the benefits are not limited to cost savings, accuracy, and efficiency — B2B payment automation can also improve supplier relationships, ensure compliance, avoid fines and penalties, and provide critical insights into cash flow and financial health.
B2B payment automation is a game-changer for businesses of all sizes. In this brief guide, we will walk you through the basics of B2B payment automation and how to implement AP automation in your business.
What is B2B payment automation?
B2B payment automation is a technology-driven process that streamlines the way businesses handle payments to suppliers, contractors, and other business partners.
So, rather than your team manually entering invoice data, checking for errors, initiating payments, and reconciling those payments in your financial system, these tasks are carried out by a solution like Nanonets.
This software automates the entire process with minimal human intervention, reducing the time spent on these tedious tasks while also significantly reducing the chances of errors and miscommunications.
How can B2B payment automation streamline your workflow?
Investing in a B2B payment automation solution is a smart move for your business. Sometimes, it is hard to believe the transformative impact until you witness the changes in action.
So, let’s look at how these payment automation solutions automate different parts of the B2B payment process.
1. Invoice processing
B2B payment automation solutions can capture data and review invoices to ensure accuracy and completeness. It extracts vital data like invoice number, date, supplier name, and amount due and matches it with corresponding purchase orders and contracts.
If there is a mismatch, the software automatically flags the invoice for manual review. Your team can review it and route it back to the supplier for correction and resubmission in a matter of a few clicks.
This automated process dramatically reduces the time spent on manual data entry and review, leading to faster invoice processing times.
2. Approval workflows
Once the invoice is matched, it is automatically routed to the designated approver(s) for review and approval. The payment automation system sends reminders and escalations for overdue approvals, reducing the chances of delayed payments while increasing the chances of getting early payment discounts and better partner relationships.
Your partners will be able to track the status of their invoices in real-time, which reduces the number of queries your AP team has to deal with. This level of transparency fosters trust and improves your business relationships.
3. Payment execution
Payment automation software then initiates payments based on the approved invoices and payment terms. The software creates payment files for various payment methods like ACH, virtual cards, and checks and sends them to the bank or payment processor.
However, it is important to note that the effectiveness of payment automation depends on the quality of the software and how well it is integrated into your existing payment systems. As the invoicing and payment processes vary from business to business, choosing a payment automation solution that can be customized to meet your specific needs is crucial.
Take Nanonets, for example. It can read invoices and purchase orders from various sources like email, scanned documents, digital files/images, and cloud storage — enabling you to go completely touchless and match and reconcile expenses without manual intervention. You can easily connect it with your existing accounting systems, including QuickBooks and Sage, so it doesn’t disrupt your current processes.
4. Payment reconciliation
Once the payments have been executed, the automation software will then reconcile them. It will cross-reference the payments made with the approved invoices, ensuring that all payments are accurate and accounted for.
Any discrepancies will be immediately flagged, allowing your team to investigate and resolve them promptly. GL codes are automatically applied, enabling seamless integration with your accounting system and making the reconciliation process faster and more efficient.
5. Reporting and analytics
B2B payment automation software doesn’t just automate manual tasks; it also provides valuable insights into your business’s financial health. It generates comprehensive reports on your payment activities, showcasing trends, identifying bottlenecks, and highlighting opportunities for improvement.
This data-driven approach helps you to set more accurate budget forecasts, identify cost-saving opportunities, and make strategic decisions based on real-time financial data.
Why should you implement B2B payment automation?
So it can streamline your workflow. But how does that translate into tangible benefits for your business?
Here are some compelling reasons to consider implementing B2B payment automation:
1. Cost savings
A recent report revealed that almost 92% of businesses use checks for payments. With the median processing cost between $2.01 and $4, processing each check manually can be very expensive for companies.
Automated B2B payment processing can reduce the need for manual labor and paper-based processes, significantly reducing costs associated with printing, shipping, and storing paper checks.
2. Improved accuracy
Manual payment processing is prone to errors, leading to unexpected costs and delays. Duplicate payments, incorrect amounts, and missed deadlines are just a few examples of the inaccuracies that can occur with manual processing.
B2B payment automation can help eliminate these errors by automating tasks like data entry, matching payments with invoices, and identifying discrepancies. In a recent survey, almost 62% of organizations cited increased efficiency as the top priority in payment automation and electronic payments.
3. Faster payment processing
With automated invoice processing, invoice approval workflows, and payment execution, the time it takes to process a B2B payment can be reduced from weeks to a few days or even hours. Invoices can be approved from any location, and payment can be processed immediately, allowing faster turnaround times and improved cash flow.
4. Stronger supplier relationships
Late payments, disputes, and other payment-related issues can damage supplier relationships. B2B payment automation helps businesses avoid these issues by ensuring timely payments and accurate payment records. This can help businesses foster stronger supplier relationships, leading to potential discounts, improved terms, and enhanced collaboration.
5. Scalability and growth
B2B payment automation enables organizations looking to scale their operations to do so more efficiently. As vendors and invoices pile up, manually processing them can be a bottleneck for growth.
Automated B2B payment processing helps businesses keep up with the volume of invoices and payments while reducing errors and increasing efficiency. Not only would this help businesses plan their activities without worrying about delays in acquiring raw materials or critical supplies, but it also focuses on more strategic tasks that can drive growth and profitability.
6. Less susceptible to fraud
By automating vendor invoice processing, approval workflows, and payment execution, payment automation software can provide businesses with a comprehensive view of their payment activities, allowing them to identify any unusual transactions or activities.
Furthermore, B2B payment automation software can implement security measures like multi-factor authentication, user permission controls, and audit trails, providing businesses with better protection against fraud.
7. Enhanced compliance
Creating audit trails and maintaining detailed payment records can be challenging with manual processes. Each partner may have their own system and set of rules for recording transactions. You end up with haphazardly maintained logs, which can pose a problem during audits or when complying with regulations.
With payment automation, each transaction is logged systematically and can be easily traced. Moreover, the software can be programmed to comply with various international, national, or industry-specific regulations, reducing the risk of non-compliance. This not only simplifies audits but also provides a structured way of handling compliance-related issues.
8. Better visibility and control
When you automate your B2B payments, you gain better visibility into your spending. A comprehensive view of your payment activities allows you to identify trends, spot inefficiencies, and make data-driven decisions. This can help to optimize your cash flow, manage your budget more effectively, and plan for future growth.
Additionally, automation provides you with greater control over your payments. You can set up approval workflows, automate reminders for upcoming payments, and receive alerts for any unusual activity. This ensures that you’re always in the loop and can intervene when necessary.
9. Increased employee productivity and better morale
Manual payment processing is not just time-consuming, but it also involves tedious tasks, which can be a drain on your employees’ productivity and morale. Automating B2B payments can free up your staff’s time to focus on more strategic tasks and initiatives that can contribute to the growth of your business.
Furthermore, they won’t have to chase after senior colleagues for invoice approvals, spend hours reconciling payments, or worry about misplacing important documents. Retaining and motivating employees becomes easier when they feel their skills and time are being used for meaningful work.
How to implement B2B payment automation in your organization to drive growth?
Change is never easy. But if you’re able to implement B2B payment automation within your organization effectively, you can streamline your payment processes, save time and money, and improve supplier relationships.
Here are a few tips to keep in mind when implementing payment automation within your organization:
1. Assess your current payment processes
From filing receipts to importing and consolidating data, figure out which aspects of your B2B payment processing are still manual. For example, email-based invoices are still being manually entered into your accounting system, or a certain vendor’s invoices are printed and mailed for approval.
Identifying these manual processes can help you determine which parts of your payment processing can be automated and what kind of payment automation solution would best fit your business.
2. Ensure there is minimal manual validation required
If your team has to manually validate each and every invoice data, you’re not truly automating your payment processes. It could lead to invoices being cleared on the next business day, which resulted in an unwanted delay in operations.
Choose a B2B payment automation software that can reduce the time required to clear invoices to mere seconds. This way, your business can deliver a superior and trustworthy vendor experience.
3. Build a universally accessible knowledge base
Creating a knowledge base accessible to all the relevant team members can go a long way in ensuring the successful implementation of payment automation. It should contain detailed information on the B2B payment automation software you’ve chosen, how it works, user privileges, approval routing, and any policies or procedures that need to be followed.
This knowledge base should be updated regularly to reflect any changes in your payment automation processes to keep everyone on the same page.
4. Take compliance and security seriously
B2B payment automation involves sensitive financial data, making compliance and security paramount. Your B2B payment automation software should be compliant with relevant regulations and international standards such as PCI-DSS and ISO 27001, ensuring that your and your partners’ financial data is safe and secure.
In addition, you should implement appropriate security measures such as two-factor authentication, user permissions controls, and audit trails. You could also establish a dedicated team or hire a third-party auditor to monitor security and compliance.
6. Make sure B2B payment automation works well with your existing systems
Say you already use SAP’s enterprise resource planning (ERP) system to manage your business processes. You have to ensure that the B2B payment automation solution you choose can integrate seamlessly with your current systems. This will help to streamline your workflow and avoid any potential issues or disruptions in your operations.
If the software doesn’t integrate well with your ERP system, your staff might have to manually transfer data between the systems, defeating the purpose of automation. Therefore, look for a solution that offers APIs or pre-built integrations with popular business software.
Why choose Nanonets to streamline your B2B payment automation?
Nanonets offers an AI-powered B2B invoice management solution that automates invoice processing with an accuracy rate of over 90%. Our solution can automatically extract invoice data from different formats, including scanned PDFs and images, and integrate with your existing accounting systems like Quickbooks, Xero, and SAP.
Nanonets is GDPR compliant and also provides enterprise-level security. It is scalable, easy to implement, and offers customizable approval workflows and detailed analytics to help you optimize your payment processes.
💡
With Nanonets, you can reduce invoice processing time from days to minutes and eliminate manual data entry errors.
Final thoughts
No matter your industry, implementing payment automation can help streamline your payment processes and drive business growth. By reducing manual processes, improving efficiency, and strengthening supplier relationships, you can set your business up for success.
Always deploy a B2B payment automation software that fits your needs and your existing systems. Your finances and employees will indeed thank you. Remember, the goal is not just to automate but to automate intelligently.
