Digitalizing the Back Office
Much of the world has started to reopen. People are heading back to the office and gathering socially. With life “back to normal”, local shops are back in business. For coffee shop owners like Joe, as much as he rejoices over a growing business, it also complicated things. For one, the number of suppliers rose dramatically—and with it the number of bills. Keeping track of payments is a hassle; missing one, for instance, could mean no coffee beans for the next month. Between writing checks, sending them and bookkeeping transactions, there was so much paperwork. Struggling to cope, Joe turned to software and has not looked back since.
It’s easy to become disillusioned by how inefficient and outdated our workflow procedures are. Manual processes and endless paperwork make already-tedious work feel like a drag, and the inefficiency is holding companies back. The back office is often overlooked, as it’s not where the growth, deal wins and new projects occur. Just because it’s not exciting, however, doesn’t mean that it’s not essential. A dysfunctional back office affects a company’s ability to best utilize its finances and people. In fact, Capgemini says 60% of customer dissatisfaction can be traced back to ineffective support and administration in the back office.1 Whether it be payroll, human resources, budgeting or billing, the back office is the backbone of any business organization, and investments must be made to ensure agile operations across the entire company.
Still largely manual, work in the back office is prone to error. This is especially so for small and mid-sized businesses (SMB) who lack resources as is. That’s where integrated software comes in—to help automate processes, so bills get paid on time and cash is managed properly. Cloud-based and AI-driven, many of these platforms help save labor cost and paper, reduce risk and ensure data security. Payment is one area that has yet to be digitized, with 90% of surveyed U.S. businesses still relying on paper checks and other manual processes. The market opportunity is huge with annual B2B payment volume at US$25tr in the U.S. alone, and a global market that is five times larger, according to International Data Corporation (IDC).2
The front office has been modernized, but customer interface is only the tip of the iceberg when it comes to digital transformation. Supporting operations must also be digitized to maintain a competitive edge. 5G is driving end-to-end digitalization, and coming out of the pandemic, these trends are accelerating. The ultimate goal is a smart and seamless system that is synced with existing infrastructure, tracks and inputs data with minimal intervention, and executes payment and invoice generation, ultimately allowing the company to focus on what matters most. While there are many back office software companies such as Paychex, Workday, Monday.com, we think Bill.com is the best positioned given strong customer growth driven by channel partnerships and widening product offerings from M&A.
Global B2B Payments Market
Source: Allied Market Research (Jun 2021). B2B Payments Market Outlook – 2028
Bill.com
Bill.com is a leading cloud-based, AI-powered software provider that digitizes and automates back-office financial processes for enterprises. Its solutions are particularly catered to SMBs as a cost-effective way to overhaul legacy paper-based processes. Testament to Bill.com’s innovative software, the company has customers from all industries, ranging from start-ups to established brands and non-profits to franchises.
No longer just a financial accounting software, Bill.com has evolved into an AI-powered financial solution platform, serving more than 3 million suppliers and clients. In the U.S. alone, Bill.com has strong partnerships with 85 of the top 100 accounting firms and six of the top 10 largest financial institutions, enabling its customers to easily integrate with existing software and standardize payment processes. This generates strong network effects and increases the stickiness of Bill.com’s services. Clients are unlikely to go through the trouble of reloading their suppliers and customers onto a new platform, as evidenced by 85% of Bill.com’s revenue coming from existing customers.
The company is also strengthening its product offering through strategic M&A. It acquired Divvy and Invoice2Go, enabling it to expand into areas like expense management and invoice tracking. 5G is accelerating digitalization and adoption of automation solutions is increasing rapidly. As more enterprises embark on going paperless and incorporate 5G-driven solutions into their processes, players like Bill.com who have innovative technologies will stand to benefit.
The securities mentioned are for illustrative purposes only. Nothing herein constitutes investment advice or a recommendation to buy, sell or hold a security. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable.
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