As businesses turn towards automation to increase productivity and decrease errors, customers turn to electronic invoicing for vendors, giving them the information needed for making payments early or on time. AP automation has been shown to increase the rate of timely payments, but a recent study has shown that even in times of a strengthened economy, especially in the U.S., delayed payments or failure to pay on accounts can have a significant impact on an organization’s bottom line.
The Increase of Late Payments
Unfortunately, late payments continue to rise in many organizations. Electronic invoicing is still the most convenient and efficient solution to the problem. It gives the customer an instant view of the money owed and allows them to set up payments easily and quickly. This ease of payment should make late payments or even non-payment on accounts relatively non-existent. But this isn’t the case with many B2B organizations in North America. The previously mentioned study showed that many organizations have seen a significant increase in non-payment on accounts. An even more disturbing fact is that 51% of surveyed organizations have determined that these accounts are actually un-collectible and have to be written off as losses.
Using Automation to Get Faster Payments
Most customers appreciate the use of an automated Accounts Payable solution, but many organizations have seen customers withholding payments longer to maintain a cash flow for themselves. This strategy can unlock millions in cash flow for larger organizations, but it doesn’t mutually benefit those who are awaiting payments. The average time for payments from large public enterprises has risen to 56.7 days on average, the highest it’s been in over a decade according to the study on PYMNTS.com.
Cons of Withholding Payments
Automation gives access to payment information quickly, but it doesn’t mean that payments will be received early or even on time. When customers choose to withhold payments to organizations, the organization doesn’t have access to expected cash flows which can mean negative effects on business operations. Many organizations are choosing not to extend credit to overseas customers because of payment concerns. Some North American organizations are also reducing the credit given to domestic customers.
Automation has made it easier to keep track of information that was previously recorded on paper. Studies on the benefits of AP automation show that organizations of any size have the potential of a higher return on ROI once accounts payable solutions are implemented. Using automation leads to the ability to utilize dynamic discounting and e-invoicing to get quicker responses from vendors. This can mean a higher rate of efficiency with lower chances for errors and fraud.