A FinTech Inflection Point: Bridging the Gap between Accounts Payable and Accounts Receivable Solutions

One study found that if U.S. corporations moved from paper-based invoicing to automated electronic invoicing, $150B of cost savings could be realized.

In our first B2B Payments GrowthBit (where B2B Payments is defined as Accounts Payable (“AP”), Accounts Receivable (“AR”) and Payment Automation solutions), we outlined the state of the market and indicators for sustained growth. Since that post in 2019, we have found that the COVID-19 pandemic served as an accelerant for adoption of B2B Payments solutions and further highlighted the benefits realized by the businesses using them. Despite increased adoption, the B2B Payments space remains largely underpenetrated and ripe for integration of historically disparate AP-focused and AR-focused solutions.

In this follow up, we discuss attributes of integrated AP and AR solutions and why we believe that the solutions bridging the gap between these departments will be best positioned for long-term success.

AP & AR Solutions: Underpenetrated Market Opportunity and Benefits of Adoption

Multiple studies reveal that technology adoption is believed to be a key driver of profitable business growth. As highlighted in one survey of CFOs and Treasurers conducted by PYMNTS and Mastercard, 80%+ believe moving to AR and AP automation solutions would reduce cost and errors in processing invoices and payments.¹ Another study found that if U.S. corporations were to move from paper-based invoicing to automated electronic invoicing, $150B of cost savings could be realized.²

Despite these benefits, 70%+ of all invoices in the U.S. are still sent via mail³, while 40% of B2B payments are made via paper check⁴. Only 41% of companies today have automated their payables or receivables systems.¹

To bridge the gap between buyers and suppliers, AP and AR departments need to embrace solutions that promote automation through direct integration and allow for a seamless exchange of data and payment flow.

Driving Technology Adoption: Bridging the Gap between AP and AR Solutions

The majority of today’s AP and AR automation software products are designed to improve the internal processes of their users rather than bridge to external systems and constituents. The lack of interoperability and connectedness between buyers’ AP departments and suppliers’ AR departments continues to prevent mass technology adoption and results in adherence to error-prone, costly and manual workflows.

To bridge the gap between buyers and suppliers, AP and AR departments will need to embrace solutions that promote automation through direct integration and allow for a seamless exchange of data and payment flow. In our opinion, the most effective AP and AR solutions have features such as: 1) integration to the ERP or system-of-record, 2) buyer – supplier network portals to upload and manage invoices and payments, 3) streamlined payment acceptance and 4) dynamic payment capabilities allowing payors to modify payment delivery and modality based on variables such as recurring vs. one-time, supplier preference and payment size.

Here’s the bottom line.

The growth opportunity within the B2B Payments remains large, underpenetrated and ripe for continued technology adoption. Fully digitized AP and AR systems require shifts in collaboration and functionality. COVID-19 provided an accelerant for change and an inflection point for further digitizing the B2B payments ecosystem. It’s now up to the AR and AP solution providers to continue bridging the gap between the two departments and emerge as a network solution, capable of fully digitizing the AP, AR and payments workflows.

LLR’s FinTech Team is actively pursuing investments in the B2B Payments space including Accounts Payable, Accounts Receivable and Payment Automation businesses.

Learn more about LLR’s FinTech Team, portfolio companies and investment focus on B2B payments.