Not long ago, business chatter was all about lines of credit to ensure a healthy cash flow. However, years of market uncertainty and high inflation have shifted the focus to systemic solutions. Almost half of B2B payments are bank transfers. To improve liquidity and reduce costs, the new financial gold standard is real-time payments.
“As interest rates have increased globally to fight inflation, it has led to a heavier emphasis on profitability and running the business on funds collected from customers,” says Mike Cartmill, director of sales at Paystand, a Payments-as-a-Service firm.
“Real-time payments are still relatively nascent in most B2B transactions, but the demand has only grown stronger as access to cash has become mission-critical for companies large and small,” he says.
Estimated losses
In theory, achieving real-time payments is straightforward, says Juan Barajas, senior product manager at Paystand. It requires trusted, interoperable systems between financial institutions that can clear and settle funds instantly. The harder challenge is what happens around the payment. Without automated reconciliation and receivables management, the speed of the transaction outpaces a finance team’s ability to account for it accurately.
Unstructured data and inconsistent bank portals continue to slow transactions and generate fees. The average B2B company loses about 4% of its annual revenue to transaction fees, credit card interchange fees and DSO delays.
The greatest barrier to improved banking interoperability isn’t technology, though.
“There is no technological reason funds should take longer than a few seconds to move from an authenticated sender in any market to an authenticated receiver in any other market. … It is a fallacy that money has a technology barrier. It doesn’t. But traditional finance institutions need you to believe it does in order for them to collect their tolls and taxes,” Barajas says.
Instead, real-time payments are most often impeded by a lack of trust, says Barajas, who explains that “the limiting factor in real-time payments isn’t speed. Banks can move funds nearly instantly. The constraint is trust. Without guaranteed security of funds at the moment of transfer, speed becomes a liability rather than an asset,” he says.
Blockchain
Blockchain adds that security, Cartmill says. Bitcoin and other digital assets are architecturally incapable of moving without it. As a distributed ledger for auditability, it sits outside traditional channels. The user’s ledger can be reconciled even before the traditional banking settlement window closes.
Adoption hesitation remains due to volatile cryptocurrency values. But, as a technology, “blockchain appears appealing, especially as more companies look to move money via stablecoin infrastructure designed for real business workflows rather than speculative crypto use cases,” Cartmill says.
When banks withdraw from lower-volume corridors, international transfers for mid-market companies are more expensive and less transparent. However, blockchain isn’t slowed down by poor data or inconsistent bank portals.
Platforms like Paystand go beyond enabling real-time payments. They embed directly into leading ERPs such as NetSuite, Sage Intacct and Microsoft Dynamics 365, so that payment data syncs instantly with a company’s financial records. For finance teams, that means faster reconciliation, cleaner books and cash flow visibility that actually keeps pace with the speed of the transaction.
“Skepticism is healthy; no CFO should move revenue onto a new technology based on promises alone. But the businesses winning with blockchain aren’t the ones waiting for consensus. They’re the ones demanding concrete proof of performance and knowing what that proof actually looks like: lower fees, faster settlement, cleaner reconciliation,” Barajas says.
Estimated benefits
The goal is a “zero-touch”, flat-fee subscription-model accounting system. It’s a real-time network that syncs purchase orders and invoices seamlessly. Fees won’t compound. Discrepancies are identified automatically. DSO is reduced by as much as 60%.
Staff members have more time to focus on other tasks. In sum, it offers a strategic advantage to finance leaders – especially those at mid-market companies with high volumes.
As Barajas says, “Inflation is a slow tax on inaction. Every day a business leaves money sitting in slow, fee-laden payment systems, it loses ground. The companies that will lead aren’t waiting for banks to modernize; they’re building on already modern financial infrastructure. That’s not radical. That’s just recognizing where value actually lives.”