MineralTree, an Accounts Payable (AP) and payments automation solution provider, expects to see some big shifts in back-office financial processes in 2021, propelled in a large part by the global pandemic and remote work requirements.
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Annual B2B payment volumes in the US are estimated at approximately $25 trillion. The high invoice volumes associated with those payments can create big operational challenges for under-staffed finance teams. Many have been slow to tackle these challenges – either due to the cost and complexity of available solutions, or simple inertia. In fact, less than 30% of small and mid-sized businesses have automated processes like accounts payable, happy to stick with their existing way of doing business. Until now.
Ramnathan and MineralTree expect businesses, especially mid-market and mid-enterprise, to build on those digitization efforts to do a lot more than replace paper checks.
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Here are five big trends he believes will change business’s payment processes and the finance teams that manage them in 2021.
1. Cash (Flow) Rules
2021 will be all about cash management and financial planning for small and mid-size businesses. Having visibility into cash position at any point in time and pinpoint control over when invoices get paid will be a huge advantage, but getting there will require the right digital tools.
2. Paper Checks Near Retirement
It’s taken a while, but digital will dominate business payments by the end of 2021. At the start of 2020, more than 60% of payments made by small and medium-size businesses were still made by paper check. Businesses will ditch that habit in a big way. Expect a big reduction in the share of business bills paid by check in 2021, especially in the middle market, where the inefficiencies are multiplied by the increased volume.
3. Virtual Payment Cards Get Preferential Treatment
There was a lot written about Virtual Cards in 2020. These unique 16-digit card numbers, created for a single-use between a payer and a payee, are highly secure and now as widely accepted as other common payment forms. The security aspect is critical — as many as 74% of businesses in the US saw an increase in check fraud exposure in 2020, according to the Association of Financial Professionals (AFP). That compares to just 3% for Virtual Cards. In addition to their security benefits, businesses that use Virtual Cards can take advantage of valuable rebates to generate extra cash. Maybe most important though, is the added visibility and control they give businesses over their cash flow. For all these reasons, Virtual Cards will go to the “top of the wallet” and become a preferred payment method for businesses in 2021.
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