7 ways digital payments result in a better balance sheet

CFOs have never had an easy or simple job, but the past two years have really tested their capacity to balance stability with growth. A pandemic that keeps changing; a shortage of workers with the right skill sets; a supply chain that is impacting inventory – these are all the difficult challenges that Chief Financial Officers face today. These challenges have only exacerbated the normal challenges of competing in a global economy.

Corporations with deep pockets are better able to weather these financial storms; businesses with lesser means have seen their organizations incur substantial, and in some cases, crippling debt. Digging out of that debt requires resilience, determination, and hard work. But in today’s digital world, those three qualities just aren’t enough.

Building a better balance sheet means a change in how payments are made

To improve their business’s balance sheet, CFOs need to avail themselves of new technologies, specifically digital technologies, to digitize and automate their B2B payments operations. PYMNTS.com, in collaboration with Corcentric, has published a report, Business Payments Digitization: A Path to a Better Balance Sheet that reveals survey results addressing the concerns that CFOs have expressed regarding their finance functions and how digitization can mitigate those concerns. We surveyed 400 CFOs from organizations generating between $400 million and $2 billion in annual revenue regarding the level of digitization in their payments operations.

The reality is that non-financial companies in the U.S. have amassed more than $11 trillion in debt (that’s trillion with a “t”) due mainly to a precipitous fall in consumer spending due to the pandemic. This fall occurred between March 2020 and March 2021. Companies are now restructuring and making attempts to refinance that debt. CFOs know that improvements, especially process improvements, need to be made that are future-oriented as well as focused on today. Increasing efficiency, reducing costs, and optimizing their working capital are all key to achieving their goals. CFOs know that digitizing and automating their financial functions is no longer a matter of “if” but “when.”

Before the pandemic, in 2019, a PYMNTS.com survey regarding payment methods found that over 80 percent of companies surveyed were still paying suppliers via checks and 45 percent still using cash. In that same survey, only 11 percent used digital wallets and e-payables with virtual cards. Now, 53 percent of CFOs say they are sending and receiving fewer check payments and 87 percent say the same regarding cash payments. Instead, “Credit card-enabled digital payments, such as those made by supplier portal or digital wallet, have seen the greatest uptick in usage of any payment type since the pandemic began,” according to this latest white paper collaboration.

Improve balance sheet health with payments digitization – get the report

7 reasons CFOs are making the move to payments digitization

Although digitization of payment processes has been a consideration for many companies, the pandemic accelerated planning and adoption of the technology. As more businesses turned to remote working, the need for this technology became obvious both for vendors and their customers. When asked for the main reasons they were fast-tracking digitization, CFOs listed the following as important.

61% – To improve efficiency in this area – eliminating paper and manual data entry reduces errors and streamlines both AR and AP processes.

45% – To improve cash flow and/or working capital – greater control over disbursements means suppliers get paid faster, customers are more likely to capture early payment discounts and rebates, and forecasts will have greater accuracy.

41% – To better integrate our operations in this area – when all transaction functions are automated, digitized, and integrated, procurement and the finance team (specifically) accounts receivable and accounts payable are better able to communicate and get a clear view of their ongoing cash flow.

36% – To give customers or vendors access to new digital tools – companies would prefer their vendors be on the same system as they are…and vice versa. Providing access to the system could be a key selling point when it comes to negotiations.

35% – To provide customers or vendors a more transparent process – vendor portals have made it possible for both customers and suppliers to view their transactions and invoice status in real-time, improving relationships that are vital for business continuity.

30% – To provide customers or vendors with a more secure process – cyber security is more important than ever. Digitization improves data security and fraud detection. With the onslaught of phishing and hacking scenarios, security is a major issue for companies.

23% – Because our competitors are digitizing this way – competition is fierce, so falling behind in implementation of this technology puts an entire organization at risk of losing business.

There are numerous reasons that CFOs have for speeding up their digital transformation initiatives with payments digitization, but regardless of the reasons, the PYMNTS.com/Corcentric report notes that of those CFOs who have done so, 91 percent say that accelerating digitization has improved their operational efficiency. Bottom line, that’s a number that’s hard to argue with, which is why we expect to see a continuation of this trend for businesses of all sizes.

To learn more about digital payments and our approach, contact us or email us at [email protected].