Changes from COVID-19 impact every side of the business, from the core products and services companies provide, to business operations and finance & accounting functions.

The pandemic has forced companies of all sizes to rethink how they do business. Unable to commute to offices, employees have replaced in-person manual workflows with virtual processes. Companies struggling with declining revenues are shifting business models and developing new offerings.

Prior to the pandemic, B2B payments at mid-market corporations was already in a state of evolution; to-date, we’ve seen COVID-19 rapidly accelerate this evolution and expose new needs and trends that will require bank and third-party support.

Kaiser’s Financial Services & Payments team explores four key shifts that are top of mind among mid-market corporations today as they seek to weather the storm and succeed post-COVID-19.

Trend 1: Cashflow Visibility

Mid-market corporates are seeking real-time cashflow visibility to enable ongoing financial planning and to inform business-critical decisions.

For many corporations, COVID-19 has slowed revenues precipitously, requiring businesses to carefully study their B2B inflows and outflows to modify financial forecasting, spending, and make business-critical operations decisions. However, many mid-market organizations have historically lacked a clear line of sight into cashflows, using basic tools such as Excel to analyze flows on a monthly basis.

Now, these organizations more than ever before require clearer visibility to understand the impact that COVID-19 is having on their business, make timely business decisions about when and how to handle B2B payments, and develop action plans for their company in the immediate and medium terms. Finance teams are seeking cashflow data not just on a monthly, weekly, or even daily basis, but in real-time, to track and monitor the status and health of their business.

Companies are using a variety of routes to achieve greater insight into cashflows and are, in many cases, open to considering new potential solutions that could meet their needs. While some companies are requesting support from their primary banking partners, others are looking into third-party solutions such as treasury management workstations and cashflow dashboards. Finance leaders note that cashflow visibility will likely remain top-of-mind, as they require this data to support strategic decision-making about how to operate and position the business for success as the economy recovers.

Trend 2: Slowing Payments and Revisiting Terms

Corporates aim to maintain buyer-supplier relationships and thus are communicating frequently to revisit terms and to confirm their ability to pay.

In the COVID-19 environment, many mid-market corporates are looking to stabilize their business by ensuring that relationships with their core buyers and suppliers remain healthy and intact. However, these businesses are often struggling with insufficient cash-on-hand and wish to delay payments to their suppliers as long as possible. To combat the friction caused by these dueling priorities, buyers and suppliers are communicating more, discussing existing terms and talking about what each company needs to continue a successful relationship.

In most cases, buyers are working to respect previously established terms, but are paying on the very last day possible within those terms to retain funds for as long as they can. In other cases, buyers and suppliers are altering terms to meet the unique needs caused by COVID-19. For example, buyers that have healthier revenues in the COVID environment (e.g., essential businesses such as construction and shipping) may offer to pay earlier in exchange for a slight discount on goods purchased. Conversely, suppliers that have healthier cashflows may offer to slightly extend terms (e.g., shifting from Net 30 to Net 45) to ease buyer pain points.

Trend 3: Shifting to Electronic Payments

Unable to print and handle paper checks, organizations are transitioning to ACH and real-time payments.

Although costly, manual, and prone to loss and fraud, paper checks still comprise a significant share of B2B payments made by mid-market corporates. While many accounting and treasury managers have sought to reduce check usage within their organizations in favor of electronic payment methods, preferences of some CFOs and payments leads for traditional paper-intensive processes have hindered the transition.

In the COVID-19 environment, however, payments teams are often unable to access office printers and mailrooms to print, handle, and send physical checks. The transition to a virtual environment is thereby expediting the shift among mid-market corporates away from paper checks and toward low- or no-touch electronic payments such as ACH and real-time payments. As buyers look to make the transition, they are communicating key value drivers of electronic payments to their suppliers, including greater visibility and control, and elimination of lost or delayed payments. Most suppliers are accommodating buyers’ requests to shift payment types, seeing value in receiving payments faster and reducing risk of bounces.

As payments are transitioning away from physical checks and towards electronic payments, card forms (e.g., P-Card, Virtual Card) are facing headwinds. Suppliers are wary of additional factors that may reduce margins in the current economic environment and as such, card fees are avoided when possible. Anticipating pushback from their suppliers, many buyers are postponing pushing new card acceptance, instead defaulting to ACH and real-time payments.

Trend 4: Exploring Automation Platforms

Payables teams are seeing more pronounced value in AP automation tools to streamline workflows during and after COVID-19.

Most mid-market AP departments manually approve, process, and reconcile B2B payments in-house with basic ERP integrations to facilitate reporting functionality. However, these processes work best in an office environment where accounting teams can approve invoices and send payments from their desks. As COVID-19 has quarantined workers in their homes, cloud solutions that handle all payables across payment types from a single payment file are becoming increasingly attractive. COVID-19 is highlighting the inefficiencies and challenges caused by manual processing and is illuminating the opportunity to streamline workflows with third-party AP automation platforms.

Mid-market corporates utilizing such platforms today note these tools have enabled a seamless transition to an at-home virtual environment and removed uncertainty from their payments functions. Further, these solutions often enable value-added services, such as e-invoicing, reporting tools for cashflow management, and payment type optimization, all of which are highly beneficial to buyers in today’s economic environment.

What do these trends mean for Financial Providers?

The need for better cash management solutions, tools to facilitate communications between buyers and suppliers, and greater access to electronic payment methods and automation platforms create an array of opportunities for banks and third-party financial service institutions. Mid-market corporates are also seeking additional guidance, advice, and support as they rapidly evolve due to COVID-19.