B2B Pricing Power Changes When Software Can Prove Its Own ROI

A new problem is emerging across the B2B economy. Companies can now deliver measurable value to customers without making that value particularly measurable by customers.

A payments platform may reduce processing costs and procurement software may improve supplier terms; accounts receivable automation may shorten collection cycles and treasury technology may reduce idle cash. But when renewal season arrives, many customers still struggle to translate those operational improvements into a number that a chief financial officer can recognize.

This gap, around visibility into value, has traditionally been attacked by B2B firms through better selling and deeper enablement spanning ROI studies, customer-success teams, benchmarks and business cases.

Today’s digitized B2B workflows create another possibility.

Read more: CFOs Shrink Their Bank Dashboards With Self-Reconciling B2B Payments 

B2B Platforms Move From Operational Visibility to Economic Visibility

Telling a CFO that 90% of invoices are now processed automatically describes what the software did. Showing that automation reduced processing expense by $2 million, captured $700,000 of discounts, eliminated $250,000 in fees and improved payment timing enough to preserve another $4 million in liquidity describes what the company bought.

B2B platforms already capture unusually rich transaction data because they increasingly sit inside the workflows that create financial outcomes. Payments platforms see transaction costs and settlement times, procurement systems see prices, terms and supplier behavior, while AP platforms see invoices, payment timing and discounts. At the same time, AR platforms see receivables, collections and days sales outstanding and treasury systems see liquidity, balances and cash movements.

The question Is whether platforms stop at operational analytics such as invoices processed, transactions completed, hours saved, and more; or translate those activities into financial outcomes like working capital released, borrowing avoided, revenue accelerated, losses prevented or margins preserved.

“At the end of the day, AP is responsible for the largest liability of corporate cash for most companies, right? But it’s never been viewed as a strategic lever operationally for those companies,” Court Toomey, senior vice president and head of Commercial Payments and Product at Priority Commerce, told PYMNTS in an interview posted this week.

“It’s about being smart about every dollar that leaves your balance sheet,” Toomey said. “In the past, it was always invoice, approval, payment, reconciliation, right? And now it should really be about analysis, decision-making, optimization.”

The PYMNTS Intelligence report “Time to Cash™: A New Measure of Business Resilience“ found in October that 77.9% of CFOs see improving the cash flow cycle as “very or extremely important” to their strategy in the year ahead.

Read also: The Corporate Bank Account Is Becoming an Event Stream

Proof of Value Changes Who Captures the Value

Historically, ROI has often been calculated before a software purchase. Transaction-rich platforms create an opportunity to reverse that model.

“What real-time transaction data is doing is enabling us to have a forward-looking assessment,” Boost Payment Solutions Chief Technology Officer Rinku Sharma told PYMNTS in April. “The question used to be what happened. Now the question is, what should we do about it right now?”

Instead of estimating the impact that automating receivables could have, a platform can measure how collection behavior changed after deployment. Instead of estimating the value of early-payment discounts, a procurement or payments platform can track discounts actually captured. Like many things in B2B, it becomes a math problem for CFOs to dissect across their income statement, balance sheet or cash flow statement.

“It’s not about abandoning legacy systems, but modernizing around them intelligently,” Garrett Baird, vice president of product, banking and FinTech at Paymentus, told PYMNTS in an earlier conversation.

Consider a CFO reviewing a software renewal. The weakest argument is that employees like the platform. A stronger argument is that it processed 4 million transactions. Stronger still is evidence that those transactions reduced processing expense by $3 million, accelerated $40 million of cash collections by several days and eliminated enough uncertainty in cash forecasting to reduce precautionary liquidity.

The closer software gets to producing that final answer automatically, the harder it becomes to treat ROI reporting as a sales exercise separate from the product. Enterprise software spent the last generation helping businesses digitize their operations. The next generation may have to do something more demanding: keep the receipts.

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