5 Keys to Success in Capturing SMB A/R Automation Market Share

Automating and digitizing accounting operations, including accounts receivable, can help businesses of all sizes save cost, time and effort. Despite many obstacles that smaller businesses face in automating the processing of payments, many are now showing progress toward the ultimate goal of Straight-Through-Processing (STP).

As fintechs pivot to serve this market of five million or more small- to medium-sized businesses (SMBs), STP paves the way for fully automated accounts receivable by electronically delivering all relevant information with the payment. To make virtually touchless A/R processes a reality for this market, solution providers will need to understand the adoption barriers and offer innovative solutions that help SMBs overcome them.

Paving the Path to A/R Automation

A recent FIS report found that SMB acceptance of digital payments increased by 38% in 2018. This was driven in part by the improved acceptance of virtual cards as SMBs embraced the improved security and convenience of this digital payment method. Further, SMBs are reaping the financial rewards of their digitization efforts, reporting an 8% average increase in revenue after accepting digital payments.

As SMBs are showing signs of readiness for accounting automation, fintech companies have been aggressively spearheading the movement to serve this large market. While it can be tempting to morph an existing solution, the reality is that solutions designed for high payment volume businesses won’t necessarily serve the needs of their smaller counterparts. Understanding the unique demands of lower payment volume businesses and delivering the right innovations will be key to winning SMB market share.

What’s Driving SMBs to Digitize Receivables?

Some of the key factors driving SMB adoption of fully-automated payments include the high cost of handling checks, faster access to funds, cost savings, security and fraud concerns, and the need for streamlined processes.

Today, most SMB accounting departments are awash in manual processes that are error prone, vulnerable to unnecessary security risks, and consume valuable resources while prolonging the length of time it takes for invoices to get paid. Converting paper checks to virtual card payments has improved cash flow for SMBs by accelerating the processing time from seven to 10 days for checks to as fast as one day for virtual cards.

Security continues to become an increasingly powerful benefit of virtual cards. The virtual card’s use of a single-use card number greatly reduces the supplier’s liability since they no longer store the customer’s actual card number. Even with ACH payments, suppliers must put their banking information at risk by giving it out to payees, something that is avoided with a virtual card solution.

Despite these advances, many SMB A/R professionals continue to be burdened with time consuming and error prone practices, which include managing a stream of disparate payment notifications received either by phone, email or fax; manually inputting card numbers into their POS for batch payment, and reconciling payments with accounting systems. The right A/R automation solution will solve all of these challenges for SMBs.

What Are SMBs Looking for in an A/R Automation Solution?

Based on our research, here are five key characteristics SMBs are looking for in an A/R automation solution:

1. Flexibility: The A/R needs of SMBs are diverse. To capture a large percentage of this market, providers need to offer flexible solutions that support multiple payment delivery methods and customization features.

2. Streamlined Processes: Many SMB accounting professionals are managing information sprawl with accounts receivable data spread across emails, accounting systems and paper. Features that enable import and export of data, consolidated views and filtering capabilities can help these professionals save time and streamline processes.

3. Simple Path to Automation: While most SMB accounting professionals understand the advantages of automation, many aren’t yet ready to make a full transition. These A/R teams are looking for solutions that will help them get started with the necessary capabilities to efficiently manage virtual card payments, and also provide a future path to more sophisticated capabilities like automated invoicing and STP.

4. No Cost or Low Cost: Getting budget approval for additional A/R functionality is a challenge for most A/R teams. Offering a low cost or no cost starting solution allows SMBs to prove the value of A/R automation tools before requesting additional funds.

5. Trust: With payment processing, security and stability are always primary concerns. SMBs need assurance that the A/R automation tools they choose will provide top tier security and issue free services.

Capitalizing on A/R Innovation Opportunities

Most finance professionals see how the use of 100% automated, virtually touchless A/R processes will free them to work on more strategic initiatives and improve the financial health of the organization they serve.

We are witnessing daily a steady transition from manual accounting processes toward more innovative payment options, like virtual cards. This is ultimately shifting A/R market dynamics toward fully automated solutions. Having a clear, well-defined product strategy that is aligned with the unique needs of SMBs is paramount to capturing market share and will ultimately make STP a reality for a market that has been largely underserved until now.

Blair Jeffery is Vice President for WEX Inc.