How digital payments can help companies in the B2B space

  • Managing cash flow has always been a challenge for businesses, and today’s difficult economic circumstances are only reinforcing its importance.
  • It’s especially a problem for businesses with outdated processes that are now seeing that adopting digital tools and technologies is a necessity.
  • Mastercard Track Business Payment Service™ improves how buyers and suppliers get paid, helps them manage cash flow better, and eliminates manual work that costs too much.

Businesses and consumers are embracing digital experiences for everything from healthcare to banking to retail. This trend is now translating into a shift to digital payments within the business-to-business (B2B) arena.

In May, Mastercard Track Business Payment Service™ launched, improving how buyers pay and suppliers get paid while eliminating antiquated processes that create errors and delays.

“Outdated payment processes are putting a strain on cash flow, which is a challenge for many businesses,” says James Anderson, executive vice president of global commercial products at Mastercard. “Managing cash-flow performance has never been more critical than it is now.”

Complexity of cash flow

Maintaining healthy cash flow is a challenge for many due in part to the lack of automation in business payments. Many times, companies need to manage their supplier and buyer relationships separately, with each buyer and supplier working with hundreds of companies. 

Consider a medium-sized manufacturer: It might pay 4,000 suppliers on a monthly basis. Employees spending money on behalf of the company must make sure every payment is approved by the right person with the right authority. Fraud is a constant concern. 

That’s just at a company level. The business-to-business payment ecosystem as a whole is riddled with complexity. On each side of the buyer and supplier equation, companies use different banks, different payment providers and different software, prefer different methods of payment, and have payment terms that can vary widely. This issue has long caused delays in making and receiving payments. On top of that, while business thrives on data — in B2B payments there’s a paucity of usable data. The result is that suppliers have to throw people at the problem of tracking down what they got paid for so that they can apply the cash they did receive.

“Today’s system of business payments complicates cash flow management and burns through valuable time and human resources in countless businesses,” Anderson says.

COVID-19 has added yet another wrinkle. A recent survey by BPM, a large accounting firm, found that 69% of US companies surveyed rated cash flow as their biggest threat in the coming months, as many companies grapple with drops in revenues. This exacerbates an already well-known industry challenge, with 90% of suppliers1 reporting receiving late payments from their customers.

Fortifying relationships

With Mastercard Track Business Payment Service, suppliers can systematically manage the preferred payment terms of their commercial business relationships at scale.

For example, a large supplier might realize that buyers, especially the long tail of small buyers, are cash constrained and could have a difficult time making payments. The supplier might want to proactively help buyers by enabling them with working capital and offering a temporary change to payment terms using credit cards.

Without a central connection, the supplier has to contact each buyer — individually and usually in person — about the change. The back and forth wastes time and creates delays. Mastercard Track makes it easy for suppliers to update payment preferences because they no longer need to contact their buyers individually.

Commercial payments can start to benefit from the ease and convenience people have come to expect in their consumer lives. Around the world, 54% of consumers pay with a card, but only 2% of commercial purchases are done this way. Suppliers incentivize buyers by accepting card for early payments, reducing their outstanding balances and working capital overhead. Both parties improve their cash flow while preserving and fortifying their business relationship.

Mastercard Track also eliminates the need for suppliers to share sensitive bank account information with their customers. In addition, the service streamlines global commerce with a single connection for multiple payment types and payment agents.

Given the complicated nature and pace of business today, cash flow challenges will only increase. Globalization has scattered buyers and suppliers across the world. Outdated manual processes make it difficult for businesses to manage payments with their entire supply chain in a timely manner. The pace of change has accelerated sharply, and it’s time for commercial payments to mirror the ease and flexibility of consumer payments in a digital ecosystem.

“Gaps in cash flow can blunt business growth,” Anderson says. “Businesses that adopt new payment capabilities such as Mastercard Track Business Payment Service will be able to quickly adjust to changing conditions, optimize working capital, and improve cash flow to ultimately modernize today’s commercial payments ecosystem.”

Find out more about how Mastercard is improving B2B payments.

This post was created by Mastercard with Insider Studios.

1. Apex Analytix, 2017 Financial Leaders’ Benchmarking Report

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