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CFOs Seek New Solutions To Extend The Value Of Their ERPs

For decades, the enterprise resource planning (ERP) system has served as a central hub of back-office operations. Known as the gatekeeper to data and process initiation, the ERP became particularly valuable for firms at the earliest stages of their digitization efforts.

As that central hub, the ERP has also been forced to flex and evolve as the needs, processes and business models of its corporate users do the same. But in recent years, the ERP has often struggled to operate as the agile tool it once was.

One of the areas in which this is most evident is in B2B payments. As the pressure grows for organizations to optimize accounts payable (AP) and accounts receivable (AR) workflows, firms need solutions that can integrate seamlessly and couple payments with transaction data in real time. And while the ERP would seem to be a logical place for such functionality to emerge, the legacy solution has struggled to make it a reality.

Speaking with Karen Webster about this ERP dilemma, Greg Bloh, CEO of Transcard, noted the opportunity for embedded payments to extend the value of the ERP, and to bring change within the enterprise for optimizing more than just supplier payments.

The B2B Payments Challenge 

With data becoming an increasingly important component of B2B payments optimization, the ERP is already well-positioned to support treasurers’ and CFOs’ need to initiate, process and reconcile transactions in an integrated fashion. Historically, said Bloh, the widespread reliance on batch payments has limited the need for real-time data connectivity between the ERP and payment systems.

Yet as corporates and their payment needs evolve, the ERP has struggled to close the gap between itself and payment-related workflows like AP and AR — with a lack of data connectivity often at the heart of the issue.

“To really drive AP and AR out of an ERP, it requires two things,” explained Bloh. “Connection, for both moving money and giving payments directions, as well as the data flow. Much of that is manual today, and the ERP requires manual, big investments to get that data in and out.”

FinTechs have taken steps to address that gap. The pressure is now on to make further progress as more FinTech platforms — and even the bank portals themselves — expand their own functionality with the potential to replace the ERP outright.

Luckily, the payments and FinTech ecosystem has made significant progress on introducing the building blocks required for data to close the gap between the ERP and payments workflows. Financial institutions (FIs) and payment networks have played an integral role in this effort, Bloh said, with innovations such as real-time payments supporting real-time data flows.

Banks’ API investments have similarly become critical pieces of the puzzle, allowing organizations’ systems to integrate directly into the bank and originate transactions across payment networks without having to toggle back and forth from a bank portal. Now it’s time to connect the dots between the ERP, banks and payment infrastructure — but it won’t be an easy feat, noted Bloh.

“There are some 1,200-plus ERPs out there, 100 or so that are predominant,” he said. “So how do you do that with a very disparate group of ERP sets? Having that common connector into the ERP to be able to communicate into the bank is another building block.”

Elevating The Back Office

Filling the ERP’s payment data gap is particularly complex, even as infrastructure lays the groundwork. FinTechs have been able to address this pain point for smaller businesses handling smaller transaction amounts, but when payments rise into the millions of dollars — or move across borders — that data gap can be even more difficult to fill.

Yet, as Bloh noted, embracing real-time data integration and embedded payments within the ERP can become even more valuable in these high-stakes scenarios. That’s because the implications of such connectivity go far beyond greater B2B payments efficiency or automated reconciliation and accounting.

Integrated data can empower buyers and suppliers to promote transparency and effective communication, for instance. Going further, Bloh also pointed to opportunities for lenders like supply chain financiers to use that real-time information and support the flow of capital for both buyers and suppliers.

When data elevates ERP functionality, it can also embolden the CFO’s ability to take a more proactive, value-added stance with analysis and decision-making. “Having more detailed and quicker access to information, for instance — details that are on an invoice, and to be able to act on those faster — all of that has a direct ROI,” Bloh said.

FinTechs have moved to both displace the ERP and augment its functionality. Even amid this disruption, the tool remains table stakes for running the back office. With a history of being able to flex to the needs of the enterprise, the ERP is yet again at a point to evolve to support B2B payments optimization – and infrastructure innovation is setting the stage to promote the necessary data integration.

It’s in this environment that Bloh said ERPs can actually push the B2B FinTech boundaries even further. “If an ERP all of a sudden becomes deeply connected, where it can share data and get transaction information back and forth, disburse documents, get digital signatures, do all of these things that are important in a payment — that becomes a new baseline for any other solution out there,” he said.

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