Defining payment analytics
Payment analytics is the process of analyzing payment data to glean actionable insights about your business. Needless to say, that covers a lot of ground, and the insights can change depending on the context.
For example, are you analyzing global payments from customers and clients, or are you more interested in payment solutions for your vendors?
Payments analytics can apply to these situations, making it one of the most versatile (and potentially complex) aspects of business analytics.
What kinds of questions can payment analytics answer?
Payment analytics can be one of the richest sources of information for your company. Here are just a few of the kinds of questions payment analytics can answer.
For incoming payments from goods
When you're analyzing payments received from the sale of goods, payment analytics may start with questions such as:
- Are certain products more popular at specific times of the year?
- Which products are most often bought with which other products?
- Are there any key purchases that drive future conversion rates?
The best answers will be prescriptive, meaning they help you decide what to do, such as choosing products for a seasonal newsletter, offering upsells, or separating customers into unique segments for different email campaigns.
For incoming payments from services
For business-to-business (B2B) or business-to-consumer (B2C) services, payment analytics can answer questions like:
- Which clients pay within 15 days, 30 days, 60 days, or more?
- Which services lead clients to add other services?
- Is the first service a client buys related to the length of time they remain a client?
Again, the best answers will help you make smart decisions to grow your company. If you're predicting a cash shortfall, you'll know which projects to accelerate to get paid quickly. You'll also know which services bring your best clients in the door, and therefore where to focus your marketing efforts.
For outgoing payments to vendors
When it comes to the payments your business makes to vendors, payment analytics can measure and track your internal efficiency and creditworthiness. You might use it to answer questions like:
- What's the average amount of time my vendors and providers wait before they get paid?
- How well are we capturing early-payment discounts to bring our costs down?
- Is our accounts payable (AP) turnover rate good enough to receive credit if we need it?
By asking (and answering) questions on both sides of the payment equation—incoming and outgoing—your finance team can be a key strategic driver for your business decisions.
Nine examples of how to use payment analytics
The following examples represent just a small window into how digital payment analytics tools and metrics can drive decision-making and business performance.
1. Remove friction from payment processes
Will your business customers pay you more quickly if you offer new payment types? What about consumers? Will they spend more in your online store if you offer the latest payment trends in mobile payments, online payments, digital wallets, or other payment methods?
When you track payment transactions with real-time data, you'll know whether alternative payment methods—from new payment gateways to American Express points—result in higher revenue.
2. Improve the customer experience
Fast, easy payment systems are an important part of the customer journey—and equally important to customer satisfaction. Payment analytics can give you a deeper understanding of transaction volume, checkout performance, and payment experience across all your payment channels.
Do some card authorizations fail more often than others? Try making different payment buttons more prominent or leading with different payment platforms to drive a positive impact on sales through checkout optimization.
3. Get paid faster
Do you offer goods or services on credit, whether to business customers or consumers? If you provide goods or services to your customers before you get paid, minimizing late payments can be key to maintaining a healthy cash flow.
Monitoring your payment processing can reveal overdue accounts quickly, giving you a more accurate assessment of your business risk and improving your risk management. It can also show you how additional payment channels, such as credit cards, could help your customers pay you on time while delaying their own cash outflows.
4. Solidify your supply chain
For your outgoing payments, payment data analytics can help you make sure those payments are going where they need to, when they need to, prioritizing your relationships with key vendors. In a supply-chain crunch, vendors you've always paid quickly are more likely to prioritize your company in return.
In addition, by tracking key performance indicators (KPIs) like accounts receivable turnover rate that vendors use when deciding whether to extend credit, you can help make sure your company has access to that credit as needed for your business operations.
5. Predict customer behavior
By mining your aggregate transaction data for payment analytics, you can figure out things like which e-commerce offers or discounts drive your maximum revenue, which products do best on which retailers, and how to connect customer interests with the products or services they'll love.
6. Elevate your forecasting
As you learn more about customer behavior, you'll be in a better position to predict demand spikes, helping you avoid production shortfalls or bottlenecks. You'll also learn where your off seasons are, helping you innovate new products or services that can bridge those gaps.
7. Even out your cash flow
Those same data points of spikes and lulls in your seasonal demand can help you predict cash flow surpluses and needs. The more you can plan ahead, the more prepared you'll be to use tools like revolving credit lines from financial institutions to meet your cash needs.
8. Improve your credit score
Thanks to the many ways in which payment analytics help you understand and manage your cash inflows and outflows, the practice can also help you better meet your financial obligations. With a strong payment history, you'll be in a solid position to maintain a high credit score and take advantage of more favorable financing opportunities.
9. Drive business growth
Ultimately, all of these advantages come together to help you drive business expansion. Offer your customers what they want, expand in your strongest markets, bolster your supply chain, and improve control over your finances, giving you access to the capital you need to grow.
Analyze business payments with BILL
If you'd like to have more visibility into your accounts payable (AP), BILL's AP automation software collects and captures your payments data for a more holistic view.
To see how BILL can help your business thrive, schedule a personalized demo or start a risk-free trial today.