Back to the Present

Portals have long been the core feature of business buying solutions known as Procure-to-Pay (P2P) systems. In the 1990s, when IBM launched its first procurement solution, REQCAT, it used Lotus Notes to build an internal solution that streamlined procurement processes. This was the first buying portal of its kind.

The concept was to create an electronic catalog—or, more precisely, a series of catalogs and forms—that offered various products and services negotiated centrally, allowing for employee self-service.

Centralizing purchase requests was crucial to IBM’s standardization efforts, ensuring compliance with negotiated deals. REQCAT and the procurement team were even recognized and awarded for saving IBM in the 90s.

Since then, procurement applications have largely followed the same model. They feature catalogs and custom forms accessible via a buying portal, which centralizes employee purchase requests. These catalogs are provided by suppliers through their own portals in a format compatible with the buying portal.

Despite minimal changes on the buying side since the 90s, companies of all sizes have since developed their own e-commerce platforms, aiming to enhance customer experience, reduce sales costs, and reach a digital audience. As search engines became the starting point for consumer research, digital transformation surged, growing at a remarkable rate.

Today, over 40% of global B2B transactions are conducted digitally. E-commerce websites and marketplaces account for 90% of this, with annual growth rates of around 20%, far outpacing the 4% growth of overall global commerce. In contrast, Procure-to-Pay solutions, which represent just 10% of digital commerce, experience a slower growth rate of around 10%, unable to keep up with the e-commerce boom.

An Attempt to Escape the Portals: Punch-Outs

As sales organizations invested in e-commerce, tensions grew between buyers and sellers. Suppliers questioned why they needed to provide static catalogs for customer portals when the same information was readily available on their websites with a simple login. The answer: purchase control.

Under pressure, a new standard emerged: cXML (commerce eXtensible Markup Language). Developed by Ariba in 1999, the then-leader in P2P, cXML was designed to facilitate business document exchanges between procurement applications, e-commerce hubs, and suppliers. This compromise allowed buyers to maintain control over purchases while enabling suppliers to use their own web applications.

This integration allowed buyer portals to “punch out” to supplier websites and bring carts back for approval before sending purchase orders. This was a groundbreaking development.

Punch-Out Limitations

While PunchOuts have improved communication, they’ve mostly been adopted by larger suppliers due to high implementation and maintenance costs. Beyond costs, portals have failed to offer two essential components of any commerce transaction: real-time product availability and streamlined payment.

Would you buy anything on a website that doesn’t show order status? It’s often a deciding factor. P2P solutions, with or without PunchOuts, can’t handle this.

In P2P, requests or carts must first be approved in the buyer portal before being sent as purchase orders, often through the supplier’s portal. Once received, suppliers confirm the availability of each line item—a process now dubbed Supply Chain Collaboration. By the time the purchase order is acknowledged and shipment confirmed, the requester might no longer need the product or have bought it elsewhere.

Unlike consumer e-commerce, P2P solutions also fail to provide seamless payment. Suppliers must log into portals to “flip” purchase orders into invoices, which they must also enter into their systems to keep sales and accounts receivable up to date. On the buy side, accounts payable must reflect these purchases—a cumbersome process.

Game Over

If we were to start from scratch, would we design procurement applications as they are now? Wouldn’t we instead start with consumer experiences and add the necessary business requirements? What would such an application look like? Let’s build it together.

We all make purchases daily—from paying in stores with our phones to buying online with cards. For a similar experience in business, we’d likely need three things:

1. Access to negotiated prices and products
2. Purchase approval
3. Accounting for payments and purchases

Access to Negotiated Prices and Products

Supplier e-commerce websites can offer custom catalogs for their customers, displaying only the selected products at negotiated prices. Access is usually provided via login credentials, the same used for punchouts. For secure credential sharing across the organization, a simple Single Sign-On (SSO) solution would work.

Purchase Approval

With AI’s advancements, it’s hard to imagine we can tackle complex challenges but not the purchase approval process. Enter AI-powered approval.

After selecting items from a company catalog and filling the cart, BlueBean appears at checkout, launching an approval process as soon as a payment card is requested. The system checks whether the purchase is from a preferred supplier, within budget, and policy-compliant.

This happens in seconds, eliminating the need to bring the cart back into a portal for extended reviews. If the purchase aligns with company parameters, approval is instant. Otherwise, the request is sent to the appropriate approver for a decision. Upon approval, the requester is redirected to the cart to complete payment.

Accounting for Payments and Purchases

After approval, suppliers can offer two payment options: invoicing or card payment. Processing stacks of invoices isn’t ideal for a modern organization—so why not pay by card?

For those concerned about payment terms and widespread card issuance, there’s good news. Many issuers offer credit terms even with charge cards like RAMP, allowing suppliers immediate payment while giving buyers 45-60 days to pay.

To avoid issuing physical cards to everyone, virtual single-use cards can be employed. These close after each purchase or are set to zero for subscriptions. Virtual cards offer native digital transactions, eliminating invoice scanning errors and enabling detailed, AI-powered expense tracking.

Closing portals doesn’t require “Stranger Things” magic—it’s just AI in action.

Corporate Payment Cards, commonly known as Procurement Credit Cards (P-Cards) and Travel & Entertainment Credit Cards (T&E Cards), have been in existence since the early 1990’s.

These cards have been popular because they have proven to be immense employee satisfiers and successful in reducing backroom complexity in organizations of all types and sizes for 30+ years:

Employee Satisfier.  Both the P-card and the T&E card are big employee satisfiers because they make buying easier and faster.  Employees are empowered to use their card to purchase and pay for items/services they need for their job without the need to engage Purchasing or Accounting:
 
– Streamlines Item/Service Purchasing and Payment.  Rather than submitting a requisition for low-value, low-risk items/services, P-cards eliminate unnecessary transactions because there is no requisition, no purchase order, and no invoice from the supplier;  employees simply use their P-card to purchase and pay for the item/service. 

– Streamlines T&E Purchasing and Payment.  Rather than submitting a requisition for travel (air, rail, car, hotel, etc.) and/or for food (individual meal, group meals/catered meals, company-sponsored entertainment, etc.), use of T&E cards eliminate unnecessary transactions because there is no requisition, no purchase order, and no invoice from the supplier; employee simply uses his/her T&E card to purchase and pay for their travel and entertainment expenses. 

Supplier Satisfier.  Timely payments to suppliers help strengthen the supply chain and supplier relationships which can be monetized in terms of better supplier terms and discounts (early pay).

Cash Flow Improvement.  Payment cards help improve working capital for both the buyer and the supplier because the agreed supplier’s payment date is advantageous to both; supplier gets paid faster and buyer gets to keep cash float before having to pay bank and the buying organization can also seek an early pay discount from the supplier.  This is a big win-win.

Reduces Organizational Cost.  Minimizing unnecessary transactions reduces backroom costs because less people are needed in Purchasing and Accounting to handle such transactions.

However, and contrary to popular belief, managing a Corporate Card program starts with every individually-issued Payment Cards and is far from being free:

Payment Card Administration.  A qualified person/team is needed to run the card program.  The cost of a single Payment Card Administrator is $85-100K per year, inclusive of salary and benefits. Depending on the size and complexity of the organization, this staff cost can quickly increase to ensure the following card responsibilities are discharged appropriately: 

– Payment Card Policy.  Develop, implement, and assure compliance to the organization’s payment card policy, which outlines the rationale and boundaries for using the cards.  Some organizations have a separate P-card policy and a separate T&E card policy while others have one combined policy that includes the guidelines for both cards.

– Card Training Program.  Development and upkeep of a Payment Card training program requires skilled resources.  Additionally, conducting card use training and monitoring successful completion of payment card training also requires such resources. 

– Issuing Cards.  Card Administrators are the only ones allowed to issue payment cards to employees and set the card spending limit. This is a key control point for the organization.

– Updating spend limits and card controls. Managing a Payment Card Program is a specific skill set and therefore an organization will need to have more than one person available to cover for card administration staff absences, vacations, etc.

– Questions from Cardholders.  Cardholders realize they are accountable for the use of their card, and hence they ask questions, which requires knowledgeable staff to respond.   

– Monitoring Cards. Card Administrators are responsible for monitoring all cards in use to assure they are used for company/organization-appropriate purposes and within approved spending limits.  This assurance is typically confirmed via periodic audits.

– Fraud Risk.  The issuing of payment cards to employees (card is in that employee’s name) opens up the organization to potential fraud from stolen, lost or  mis-used cards.      

– Monthly Card Statement Reconciliation.  Card Administrators are responsible for ensuring that all cards in circulation have their statements reconciled, together with all properly filed receipts, each month per Card Policy.  The Administrators are also responsible for contacting/following up with cardholders who fail to get their expenses filed and their statements reconciled on time/each month.  This is another key control point because the organization wants to ensure that it is only paying the card-issuing bank for appropriate and timely employee expenses that are charged on the cards. 

– Canceling Cards.  Card Administration, the organization’s only authority for card management, is responsible for canceling cards when an employee either fails to comply with Card Policy or exits the organization.  This requires skilled staff resources to manage. 

According to the U.S. Bureau of Labor Statistics, 2022 will be recorded as one of the years with the highest death rates of businesses since the turn of the century. The primary reason for such a level of fatalities is lack of funding or working capital. With 30% fewer businesses started in 2019 compared to 1970, reversing the course of innovation in the country is of paramount importance if we do not wish to see the fabric of our economy and society erode further.

Working capital is a necessity for any business to prosper. And in the world of Business to Businesses, not being able to offer credit is often a non-starter. According to CAPS Research, almost 80% of companies in the manufacturing and service sector request payment terms ranging between 30 and 45 days on their invoices.

But does it really have to be that way? We believe not. Digital innovation in the B2B procure to pay space can radically alter the fatal course of business disappearance. Indeed, procurement practices until now required invoices for a payment to be processed. This would in turn result in tying extensive capital for small businesses in dire need of it. Today, such invoices could be eliminated for about 35% of the global B2B commerce now conducted online. This number could even reach 80% by 2050 as digital transformations across sectors drive the frantic +20% annual growth of B2B e-commerce worldwide.

Digital technologies now make it possible for employees to buy online the way consumers do. Leveraging AI, such technology can apply controls and enforce policies. This combined with the use of virtual cards for payment at check out can eliminate the need for invoices. As major issuers have jumped into the virtual cards reality, companies working with their bank partners can benefit from payment terms they require to do business, making the working capital argument often attached to the need for invoices irrelevant.

This new approach to business procurement would not only make buying organizations more productive as their purchase to pay processing cycle times would drastically fall, but they would maintain credit while ensuring immediate payment to their suppliers. Adopting such technology would significantly strengthen their supply chains and make buying organizations attractive to suppliers and employees alike who would feel empowered by the reduced bureaucracy to get the job done.

In practice and accounting for the $2 trillion B2B business conducted in the US in 2023, we estimate that up to $70 billion of capital could be released in the economy. This would create a massive stimulus for small business growth and give them a fair fight to make their ventures successful. Virtual card purchases not only makes business sense, but it is also an opportunity to reestablish a world order where our banking partners participate at equal measure to the economy and restore an equilibrium to our societies.