Industry News

Bottlenecks in B2B payments

Matthew Smith
Wednesday, September 2, 2020

Businesses begin to realize the opportunity of digitizing payment operations

While consumers have been gradually shifting more and more towards digital payment methods over the past two decades, the business payments environment is currently experiencing a rough awakening.

The COVID-19 pandemic has exposed the weaknesses of relying on outdated payment methods, such as paper cheques. At least 28% of companies globally say the health crisis has significantly affected their AP processes, with 86% of them now prioritizing AP automation as they rethink their accounts payable (AP) and accounts receivable (AR) approaches.

Sticking to old habits during a crisis is a recipe for extinction. And with the significant digital shift taking place in the payments environment today, organizations are readjusting their AP strategies accordingly. So far, only 5% of firms have automated all of their financial operations. But even businesses that had previously assumed top-notch transaction workflows have room for improvement to enhance the buyer-supplier cooperation.

For many businesses, this shift can seem daunting and overwhelming at first. To navigate an evolving B2B payment landscape, we have put together this guide that helps your business identify bottlenecks in payment operations and improve processes by adopting the right digital AR/AP tools - using a simplified process mining approach.

What is Process Mining?

Process mining involves an analysis of a companies’ existing workflows to identify bottlenecks, an evaluation of alternatives against business goals, as well as the implementation of the most optimized workflow.

In a nutshell, the concept can be broken down into the following steps:

  1. Process discovery: Visualization of the current process
  2. Process enhancement: Analysis of the process for optimization potential
  3. Process optimization: Re-design the documented process based on the defined strategy
  4. Process implementation: Introduce the optimized workflow into the company’s existing process landscape

While this is a very simplified description of process mining, the important part of the concept is the analysis of the current state processes, which many companies tend to skip or adopt short-cuts to it. Process mining recommends actions to optimize workflows based on a diagnosis of the root problem. Investing time to identify the main areas of friction helps to improve workflow efficiency on the back-end.

Let’s have a look at how you can apply this concept to optimize your company’s payment workflows.

Identifying bottlenecks in payment operations

Processing funds and reconciling payments manually creates significant challenges for both accounts receivable (AR) and accounts payable (AP) departments. It consumes valuable back-office resources and can cause numerous problems, among them susceptibility to fraud.

Taking a closer look at the end-to-end process of B2B transactions, there are various areas for possible bottlenecks and thus inefficiencies. Breaking the workflow down into stages helps to identify the friction points and find the most urgent areas for improvement.

It can be helpful to map out existing processes in a flow chart, a step-by-step visualization of a process. It is quick to follow and maps out the events, which makes it easier to locate where things are not moving, and hence, the bottleneck is forming.

Indicators of a bottleneck in a payment system include:

  • Long wait times - such as work delays because someone is waiting for an invoice, receipt, or more information.
  • Backlogs - Many payments are pending at one end of a process, not because of lack of funds, but operational issues.
  • Lack of transparency - Ever wondered when your cheque will arrive in the mail? Not knowing where your money is inevitably leads to inefficiencies in your cash flow planning.

Common bottlenecks and improvement suggestions

Once you identify the main friction points, it is time to evaluate improvement alternatives. The following graphic provides a good overview of the AP/AR process and suggestions for improvement at each stage:

How MazumaGo (formerly DivDot) can help

Adopting digital solutions doesn’t have to be tied to expensive transformation costs. While it is up to you to identify bottlenecks in your internal processes, MazumaGo is a payment software that helps you digitize your payment operations internally and optimize workflows.

We facilitate companies to move away from cheque by processing payments through secure ACH bank-to-bank transfers. With MazumaGo, you can send and collect no-limit payments for a flat fee. No percentage charges, no transaction limits, no tedious paperwork.

Sounds like something you want to try? It’s easy to get started. Sign up now to find out how simple business payments can be.

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