In 2022, more than half of all businesses reported they have experienced late payments. Those who have found themselves waiting on a late payment have lived through the long-term effects this creates for any organization. These long-term effects create a domino effect for corporates and small businesses alike, with impacts ranging from limited cash flow to stunting business growth, all creating a situation that demands immediate attention.
Research suggests that the average Days Sales Outstanding (DSO) for most businesses is 67 days and 47% of business say their DSO has increased in the past 12 months. In addition to longer DSO, late payments reduce working capital, impact strategic planning, and delay potentially essential investment opportunities.
The bad news is that the manual, error-prone processes in Accounts Receivables (AR) continues to be the major culprit. Research shows that 61% of late payments are due to incorrect invoices or invoices arriving too late.
More questions than answers
With so much talk about digital transformation and AR automation many companies are struggling to answer simple questions like:
- What have I been paid for?
- Why was a payment less than the invoice?
- How many invoices are part of one payment?
- How many of my late payments are now severely delayed (90-120 days)?
There are numerous difficulties with simply matching payments to invoices as reconciliation activities rely heavily on manual processes. On top of this, when payments lack remittance data, it is increasingly difficult to match received payments to issued invoices leading to confusion around which invoice the payment should be applied to. These issues often allow invoices to go unsettled or unpaid.
AR departments are forced to make a significant human capital investment to address these issues. Research has found that 65% of medium-sized companies spend an average of 14 hours a week chasing late payments. This is an enormous strain on resources that would provide more value strategically aligned to key growth incentives. In a sharp contrast, 87% of organizations with automated AR functions say they are processing faster, improving cash flow, and reducing late payments.
How banks can help their corporate customers overcome these challenges
Corporates are looking for secure, streamlined, and automated payment methods that can scale with their business requirements. This provides banks with an opportunity to help break down current payment frictions that their corporate customers are currently experiencing around invoice reconciliation and lack of visibility into payment status.
Banks that provide automated AR reconciliation solutions can overcome significant customer pain points in the following areas:
- Deliver a centralized view of cash flow and liquidity
- Enrich remittance data and simplify invoice reconciliation
- Enable higher match rates than manual reconciliation efforts
- Provide a single payments portal for both buyer and supplier
- Reduce risk through data driven insights into payment status and potential late payments
- Improve ability to take advantage of volume and dynamic discounting schemes
To address these challenges, OpenText has developed a modern, cloud-based portal for banks and financial institutions. Internal banking staff and corporate customers can view, search, and create customized reporting on payments, invoices, and statements with OpenText Integrated Payments and Reconciliation solution. Offered as a managed service, this solution has been designed to decrease late payments and improve DSO.
Processing more than 33 billion transactions every year, for 1.5 million companies around the world, OpenText’s Business Network dedicated Financial Services team is committed to creating efficiency in payment operations. Leveraging the unique product capabilities of the OpenText™ Trading Grid™ platform and the STP Financial Hub, banks and their corporate customers benefit from enhanced visibility, translation services, and connectivity capabilities.
To find out more about automated AR Reconciliation solutions from OpenText, view our solution overview.