Battling the bear market: Why companies need to focus on customers’ billing and payment experience

While there remains debate among economists about whether we are officially in a full-blown recession, the signs are certainly there. Like most executives right now, the outlook concerns me.

In any case, businesses aren’t waiting for the official pronouncement. They’re already bracing for impact as U.S. inflation and interest rates soar. Inflation peaked at 9.1% in June 2022 — the highest increase since November 1981 — and the Federal Reserve is targeting an interest rate of 3% by the end of this year.

Facing a volatile market and a largely grim outlook deep into 2023, executives are naturally focused on doing more with less and protecting their cash flow. As leaders look for opportunities to increase efficiency across the business, they tend to prioritize the invoice-to-cash process last.

In partnership with Wakefield Research, Versapay surveyed 1,000 C-level executives at companies with a minimum annual revenue of $100 million on their accounts receivable digital transformation efforts. Our research revealed that companies whose AR operations are most impacted by current indicators of the recession also have yet to make significant headway with digital transformation — and their customer experience is paying the price.

With customer retention doubly important during a downturn, B2B companies can’t afford to neglect their buyers’ experience in the billing and payment process.

Economic downturn puts pressure on the accounts receivable department

Accounts receivable has the most immediate impact on cash availability. So, it's not surprising that CFOs are feeling the brunt of the current economic climate’s effects: inflation, rising interest rates and labor shortages topped CFOs’ list of the biggest headaches facing their AR.

When inflation soars, cash in hand today is worth more than it will be tomorrow. Rising material and production costs put pressure on profit margins, and growing interest rates increase the cost of borrowing. Any delay in receiving payments has a powerful effect on operating capital.

Companies that have not yet completed their AR digital transformation (our research finds this is most businesses) leave money on the table by not doing so.

Companies that haven’t made inroads with AR digitization are more susceptible to recessionary effects

Companies that are early in their AR digitization efforts are more likely to be impacted by the effects of the recession, and our research confirms this.

Among executives who identified supply chain disruptions as a source of strain for their AR team, 53% said they have a great deal of work left to do in digitizing their AR. This was substantially higher than the average response across all executives (at any stage in their AR transformation journey) of 32%.

Similarly high, at 49%, was the proportion of executives who identified rising interest rates as a source of strain for their AR team stating they're still early on in their AR digitization efforts.

Companies with higher rates of automation in their invoice-to-cash process are better equipped to face economic headwinds simply because they can bring cash in faster.

But, slow internal processes only account for one part of why businesses get paid late. The other — larger, I’d argue — reason why B2B companies get paid late is due to customer disputes and dissatisfaction. This is a challenge that automation alone can’t solve because it requires suppliers to foster more collaboration and transparency with their buyers.

For this reason, companies trying to optimize cash flow during the current downturn should make customer experience in the invoice-to-cash process their focus.

You can’t control macroeconomic conditions, but you can control your customer experience

Invoice disputes are typically caused by issues such as missing or damaged goods and conflicting expectations around credits and discounts. What we found, however, is that the culprit is often not the goods or services themselves, but human error and miscommunication during the payment process.

A customer’s negative experience during the payment stage can have more consequences for a business’s bottom line than one might think. Most executives we surveyed said miscommunication in the payment process has led to their company losing future revenue or getting paid less than they’re owed (82% and 85%, respectively).

But poor customer experience is too often part and parcel of B2B billing and payments. And executives are aware of the problem: 72% of C-level executives willingly admit their AR department is not customer-oriented enough (CFOs understand this even more, with 81% agreeing).

In the absence of tools designed especially for accounts receivable (on the supplier’s end) and accounts payable (on the buyer’s end) to collaborate, finance departments must rely on traditional methods of communication like email and phone. This makes it difficult for customers to get clarity on important information like payment terms and deadlines, creating a disconnect between suppliers and their customers.

This confusion ultimately delays payments, directly impacting the bottom line. Typical AR automation tools don’t solve this problem, instead they focus only on improving back-office tasks like invoice creation and cash application. Even where artificial intelligence excels, like matching incoming payments with their corresponding invoices, exceptions will still emerge and those require human collaboration to resolve. These are important and powerful digital tools for AR, but unless they consider CX, they only go halfway.

Collaborative AR is the answer to the CX problem in accounts receivable

A Collaborative AR Network addresses the root causes of delayed payments by making it easier for AR departments to collaborate with their customers over the cloud.

Versapay is the first AR automation solution designed to address the human side of AR by empowering buyers and suppliers to work together to solve challenges in real time. Our Collaborative AR Network is what you get when you combine industry-leading AR automation, a next-generation B2B payments network and all the collaboration tools we’ve come to expect from modern cloud-based apps.

As a result, AR departments are able to bridge the divide between them and their customers and enjoy:

• 50% less manual work
• 30% fewer past-due invoices, and
• 25% faster payments

In this bear market, improving customers’ experience of the actual transaction process is a measure that businesses can’t ignore if they hope to preserve cash flow.