Payment problems cause business survival concerns

Payment problems cause business survival concerns

More than half of Australian businesses struggling with payment innovation have severe concerns about near-term survival, according to new research by American Express.

The research found 59% of companies yet to widely modernise payment practices were at significant risk of failing in the next three years, whilst another 19% were at moderate risk of collapsing.

The American Express Payment Revolution research revealed that around half of all Australian businesses struggled with making payments to suppliers (44%) or receiving payments from customers (48%).

The Payment Revolution research included a survey of 355 Australian CFO from businesses with annual revenue values between $2 million and $300 million from 15 different industries. One third (30%) of these businesses were unable to reconcile supplier invoices at least every other month.

The survey found at-risk businesses were struggling with archaic financial processes, increasing payment volume and concerns about issues such as security and regulation.

Around a third of surveyed businesses were still yet to widely modernise their payment approach to managing payments, with only 22% moving to a completely automated solution. These businesses were much more likely to suffer from issues such as cash flow problems, accessing capital and customer retention.

Martin Seward, ‎vice president for small & medium enterprises at American Express Australia said it was critical that these struggling companies changed their approach to payment.

“We are approaching a financial event horizon for many Australian businesses.  The research tells us they can’t sustain this outdated approach to managing payments much longer,” Mr Seward said.

“The most alarming part is that the Payment Revolution research shows that a lot of this concern is avoidable. Companies that push through changes to payment processes not only survive, they thrive.”

The Payment Revolution research found businesses that embraced emerging payment technologies were almost twice as likely to pay suppliers on time, more than two times better at managing cash flow and three times better at processing payment than other businesses.

These early adopters were also almost twice as successful at customer retention as those with poor payment practices and they expected to see a business revenue increase of 20% or more during the coming year.

Embracing future payment technologies

The research also suggested that other companies were expecting to follow suit, with 76% of senior financial executives saying a payment overhaul had a high or very priority over other business objectives.

The research found 89% companies had allocated funding this financial year for payments modernisation processes, with 39% having already invested between $50,000 and $100,000 to improve payments over the past three years.

Importantly, many executives would turn to emerging technologies to help transform their business’ approach to payments during the next 12 months.

Some of those that don’t already use these technologies, some 20% of companies would soon use API to streamline payments, 18% would deploy smartphone mobile wallets, 16% would increase mobile transactions, 12% would trial Blockchain-style distributed ledger technology, and 11% expected to incorporate Virtual Card Numbers to improve business transactions. Overall, 38% of companies expected to deploy at least one new technology during the coming year.

“The findings highlight the appetite amongst senior financial executives to invest in innovation. Many of these technologies are still maturing, however, early adopters are already seeing the benefits of modernising the approach to payment,” Mr Seward said.

“Not only were these companies seeing these technologies as a chance to drive greater administrative efficiencies, but we also observed a relationship with better customer retention, increased innovation investment and a greater appetite for business risk.”

Additional research findings

  • The biggest technology priorities in the near future for those that had deployed at least one new payment technology were improved cash flow management (41%); better business efficiencies (41%); frictionless payment experiences (40%); and, enhanced cross-border/FX payments (36%).
  • CFO said the biggest barriers to deploying new payment technologies were concerns about security (47%), employee acceptance (33%), regulation (33%) and technology uncertainty (28%).
  • Some 32% of CFOs said being able to demonstrate positive ROI was critical to the acceptance of new payment technologies.
  • Payment Revolution found more than 61% of financial leaders ranked their personal appetite for innovation high, with half also demonstrating a high willingness to take risks in pursuit of better business results.

To download a copy of the Payment Revolution whitepaper visit http://www.chieffutureofficer.com.au/.

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