Drive digital transformation with payments innovation (2024)

This article was originally published as part of the 2022 CFO Insights Report from U.S.Bank.

Effectively deploying technology in their businesses is the joint top priority for finance leaders in the U.S., alongside improving risk identification and mitigation, and cutting costs. However, when asked which areas of finance are ripe for digital transformation, they are prone to overlook some of the biggest opportunities.

For example, only 20% of finance leaders identify accounts receivable as a top-three area for transformation, and only 18% pick out accounts payable. This is less than half of the number that selected other areas of finance, including performance reporting and analytics (43%) and planning and budgeting (40%).

While they may not be front of mind for finance leaders, there are significant opportunities to optimize accounts payable and receivable by harnessing new technology and the data-related insights it can bring. As a starting point, businesses can work with partners to analyze their historical payments data to discover whether their systems could be more cost-effective. By exploring the range of alternative payment methods available, such as real-time payments (RTP) and virtual cards, businesses can access these opportunities to reduce costs.

Changing dynamics with cash up-front

Take the example of reimbursing candidate expenses when they travel to an interview. Traditionally, candidates would have to submit their expenses for their flights and hotels to the accounts department of the interviewing company for approval. For large companies, this creates significant operational overheads. An alternative is to issue virtual cards to candidates that can be used to make purchases up to a set limit, subject to restrictions based upon the reasonable requirements of the candidate in attending the interview.

This would remove the costs involved in processing expenses claims. There are multiple other use cases for such a system; for example, when a large number of employees are required to travel for a company away day. In essence, it would lower costs for all expenses claims, business wide.

Empowering payers and payees with payments innovation

Virtual cards aside, recent payment innovations, such as RTP, remove many of the overheads associated with traditional ACH (automated clearing house) payments. As RTPs are instantaneous, this also eliminates any risk of non-completion. RTPs and request for payments also gives businesses the option of offering discounts for accelerated payments, bringing significant cash flow benefits.

It may also become apparent that certain payment methods are more efficient from a cost and revenue perspective. Armed with this insight, businesses can encourage customers to use their preferred payment method by presenting it as easier to use or even offering a discount for using it.

Four steps to transformation success

Digital transformation of payments or any other area of finance can bring huge benefits across the function and beyond. Nevertheless, transformation is necessarily extremely complex, and initiatives often fail to deliver the intended outcomes. Taking the following steps can make success more likely.

1. Outline a clear vision Finance leaders identify employee reluctance and resistance to change as the second-most important barrier to digital transformation, behind the lack of an enterprise-wide digital transformation strategy. The workforce can only be brought on board if leaders – notably the CFO – articulate a vision for their company’s digital transformation vision that illuminates the benefits to the entire workforce. It is also vital to articulate which additional resources will be made available to drive the transformation, to head off employees’ fears of being overburdened during the process.
2. Start small Digital transformation can appear complex to the point of being overwhelming. It is, therefore, imperative to start small and generate quick wins. This will drive engagement from senior leadership and employees, building momentum in the transformative process. It also provides an opportunity to learn before moving on to more complex transformation initiatives.
3. Emphasize the importance of operational efficiency The CFO should frame business operational efficiency objectives and stress their importance in freeing up capital for investments in digital transformation. Digitizing processes generates savings, freeing up funds for further digital investments. By articulating this virtuous circle, the CFO can help the workforce to understand the enterprise benefits of digital transformation.
4. Pursue partnerships Businesses embarking on digital transformation do not need to do everything themselves. Explore which potential partners can help your business through their digital capabilities and software. With respect to payments, for example, numerous platforms exist that enable businesses to streamline and automate the process of evaluating procurement options, making bids and processing invoices more efficient. Pick the one that best suits your business’s circ*mstances.

Digital transformation brings tremendous benefits, but businesses need to be aware of the challenges they will face in attaining them. The CFO and other finance leaders can help by making everyone in the business aware of both.

We surveyed 750 senior finance leaders to see how they are navigating a new wave of unexpected challenges, including rampant inflation, talent shortages and supply chain bottlenecks. Explore their answers in the 2022 CFO Insights Report from U.S. Bank.