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The Transformative Impact of Digital Payments
821 Plays10 months ago
Join us for an engaging conversation with Steve Weber, founder of PaperTrl, a groundbreaking AP automation product. Explore the imperative for automation in addressing key benefits to help mid-size companies from labor shortages and efficiencies to fraud and phishing attacks, and the securing of digital payment methods. At the intersection of technology and finance, this episode offers a comprehensive exploration of the challenges and opportunities in the accounts payable automation space.
PaperTrl is a comprehensive, end-to-end AP automation solution. PaperTrl is a fully integrated, cloud-based AP automation software solution that helps organizations simplify and streamline the entire AP process from purchasing to payments.
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Transcript
Introduction to the Podcast
00:00:04
Speaker
Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market. The center is the leading source of knowledge, leadership and innovative research on the middle market economy. Throughout our podcast, we will feature middle market leaders and stakeholders to hear their real world perspectives on trends and emerging issues. Accounts payable automation is a critical area of the finance, accounting and supply chain of most companies.
The Role of AP Automation
00:00:31
Speaker
Yet little focus is paid on the specific tools and new technology making this function more efficient, secure, and accurate.
Guest Introduction: Steve Weber
00:00:39
Speaker
Today, I'll be talking with Steve Weber of Paper Trail, an AP automation company and NCMM member company. Welcome to the market that moves America. I'm Doug Farin, managing director at the National Center for the Middle Market located at the Ohio State University Fisher College of Business.
00:00:59
Speaker
And I'm really excited about today's conversation.
Steve Weber's Background
00:01:03
Speaker
Joining me today is Steve Weber from PaperTrail. PaperTrail, AP automation product for midsize firms. So welcome, Steve. Hi, Doug. How are you today? I'm doing great. Thanks. Good, good. Yeah, looking forward to talking with you, Steve. We're excited to have PaperTrail as one of our member companies at the NCMM.
00:01:27
Speaker
Obviously, we share a common relationship with Visa, and I'm glad they introduced you guys to us. So first, can you tell us just a little bit about your personal background, what you've done throughout your career, and then how Paper Trail came about?
00:01:46
Speaker
Sure. So I come from a rather large
Founding of Paper Trail
00:01:50
Speaker
family. I'm number seven of eight children. And my family moved to Columbus when I was about four or five years old from St. Louis. So lived here my whole life, went to school at DeVry. And then my first job out of school was with a software company. And I kind of knew
00:02:12
Speaker
I was pretty lucky as before going to school I knew exactly what I wanted to do. I was already working with computers and software a little bit in my dad's business helping him to develop what would have been a kind of lightweight CRM system for the Commodore 64.
00:02:32
Speaker
And I knew I wanted to work in software and specifically I wanted to work in software that made people's lives easier where you could see sort of the direct impact the software had on people's jobs.
00:02:48
Speaker
And so I worked for Sterling Commerce for many years, worked my way up to become a vice president. But ultimately, I knew that I wanted to step out and go do my own thing.
Paper Trail's Evolution and Efficiency
00:03:00
Speaker
So back in 2001, so about, what, 22 years ago, I left Sterling and stepped out and started what would be my first of three software startups, the first one
00:03:14
Speaker
was a Microsoft partner and we were focused in retail, worked with many retailers here around Columbus doing point of sale and integration from point of sale back to ERP systems.
00:03:27
Speaker
And then with that integration component, that became more and more of what we became known for. And we helped Microsoft land some of their largest retail accounts for point of sale because of our integration capabilities.
00:03:46
Speaker
And so ultimately that integration software ended up becoming the core of the business. We got out of the Microsoft reseller business and just focused on doing integration work for retailers. And this was in like maybe 2008 when
00:04:04
Speaker
Multi-channel retail was first taking off, and retailers needed to do stuff like buy online, pick up and store. We developed a lot of software for companies like Herschel Supply, who's one of our customers, and here locally, Ohio Mulch. And yeah, a number of folks helping them get through that revolution.
00:04:26
Speaker
And then my partner, my co-founder of Ven channel ended up taking over that company and buying out all the shareholders. And then, you know, me and our COO at the time, our chief marketing officer at the time, Shilpa Murano, stepped out and created our own little consultancy
00:04:49
Speaker
helping software companies to raise money from venture capitalists or help them with product development. And that's really how we got involved with PaperTrail.
Addressing Company Challenges with AP Automation
00:05:01
Speaker
PaperTrail was a software product that had been developed by a federal contractor back in 2015-16 for their own internal use. And what PaperTrail does is accounts payable automation
00:05:15
Speaker
So everything from taking vendor bills, scanning them into the system, being able to route them for approval internally and then pay the invoices through the system. And we got really excited about the product because just kind of going back to the theme of helping companies, it was the
00:05:40
Speaker
It enabled Tidewater to reduce their accounts payable staff down from about five people to two people. They had about 1,500 vendors they were supporting, so lots of people in AP. They were able to reduce staff from five people down to about two people. Not only that, they were able, this federal contractor was able to get more than 500 of their vendors up and running on the software in less than three months.
00:06:08
Speaker
And yeah, and so they weren't even a software company and that really spoke to how easy the software was to use and how motivated the organizations were to use it. And so we got really excited about that. Because even if you know what you're doing, getting 500 users up and running is not easy. Sure. Yeah, it sounds like a huge task.
00:06:32
Speaker
Yeah, so we worked with them for a while to develop the product and take it to market and got really excited about it. And kind of long story short, last year we ended up acquiring the software away and begin our own focus on growing paper trail. Interesting. That's quite a career progression. So my first question for you from kind of your point of view,
00:07:01
Speaker
obviously deep experience and all different types of software, as you said, that help companies. What do you see as some of the emerging pain points or issues that companies are dealing with?
Transaction Accuracy and Fraud Prevention
00:07:14
Speaker
You touched on costs and efficiency, so you reduce the need for maybe large departments of people to manage this where the software can step in. But are there any other emerging patterns or trends as you talk to companies where
00:07:30
Speaker
you know, specifically the type of work that paper trail does and the benefit of the software, you really see it being extremely helpful. Well, certainly the labor pieces, as we mentioned, is a big part of it, especially with the shortage of, you know, we work with the Ohio Society of CPAs and, you know, there's the labor shortage happening everywhere. But, you know, they're able to say, look, there are
00:07:56
Speaker
a lot of CPAs and folks in the accounting field that are retiring and they're not being replaced nearly fast enough. And so not only does that impact accounting firms, but it impacts businesses as well and the accounting departments inside businesses. So certainly the labor shortage drives the need for automation, but
00:08:17
Speaker
Right now, interestingly enough, we hear about the downsides of inflation all the time and the higher interest rates. The upside of that is that cash being held in just conventional checking accounts for businesses is actually earning decent interest sitting in the bank. And companies need and want the ability to hold onto their cash longer
00:08:47
Speaker
and have the opportunity for some of those high yield interest payments on their cash. And so unfortunately, most of the AP, if not all of the AP automation software in the space today, doesn't give companies the opportunity to do that. They kind of require companies to pre-fund all of their payments to vendors, sometimes seven to 10 days before the invoices are due.
00:09:16
Speaker
And so as such, companies aren't able to benefit from that, you know, from holding on to their cash that long.
Middle Market Trends and Opportunities
00:09:24
Speaker
Yeah. How about accuracy? Do you see any benefits from like more accurate transactions where there are less chance of like a human mistake or error? Oh, absolutely. You know,
00:09:36
Speaker
I think it was when I was at Sterling back in the EDI business, folks with Home Depot would talk about the fact that it cost them $25 to process an invoice, and that's if it's right. It costs about $125 to process an inaccurate invoice if you have to chase it down. The same applies here.
00:10:03
Speaker
It's that. And then I'd also add to it just right along with that fraud is also such a huge problem. Fraud and phishing attacks have become so, so, so rampant. And they're targeted right at accounts payable departments.
00:10:23
Speaker
folks getting emails inside the company saying, hey, I'm so-and-so vendor, and we've changed our bank. Can you please update your ACH payments for us? Yeah. Right? Right, right. So tell me why you see the middle market as maybe the ideal target customer for paper trail. I think I might know the answer to that, but I'd like to hear you talk about that a little bit.
00:10:53
Speaker
There's probably a couple of different reasons, not the least of which is that the trends and the changes that have been happening in mid-market accounting software. The cloud creates opportunities for all sorts of different software, but when you look at the investments that your traditional ERP software companies are making
00:11:20
Speaker
in upgrading and moving companies to the cloud, most of the investment is happening in the middle market ERP software packages. So specifically, we're talking about Sage and Accumatica, Microsoft Business Central, QuickBooks at that lower end of the middle market.
00:11:40
Speaker
you know it's much easier for software companies first of all to address that market because it's not highly complex and there's lots of add-ons being written specifically into the middle you know for middle market companies because it's it's large enough that and those opportunities are lucrative enough
00:12:00
Speaker
that it makes sense for companies to build add-ons, et cetera, for those software packages. So all this new software and all the cloud software and the open APIs and all that makes it very fertile ground for a company like us that is a third-party software developer who needs to integrate into all those software packages to make our software work.
00:12:26
Speaker
it makes it much, much more fertile than trying to go up market with the big, big enterprises who are still on these quasi proprietary versions of SAP and Oracle and that stuff, or the very small users whose software may not have that level of sophistication yet.
Competitive Landscape and Differentiation
00:12:46
Speaker
Yeah, right. So can you describe to us what the marketplace looks like in terms of
00:12:54
Speaker
you know, AP automation and kind of the space where paper trail plays. I'm sure there are probably a number of different firms and competitors out there. You mentioned that this was started by a government contractor, but what do you, why do you think kind of your unique solution
00:13:10
Speaker
was needed or kind of what's the specific role that it feels? Sure. So, you know, kind of going along with what I just talked about with the ERP systems, at the same time that those software companies were opening up their technology, you know, banking was also opening up their technology, the banks were opening up the others, this concept called open banking, which basically gives you the ability to hit
00:13:37
Speaker
a bank's API like US Bank or Chase Bank or whoever hit their API to be able to do things like write checks, cut checks or make ACH payments or send credit card, virtual card payments.
00:13:53
Speaker
And unfortunately, most software packages weren't taking advantage of those open APIs that the banks had. And again, this gets back to this whole idea of float. What we saw is that most of the players in the space, the way they were handling their customers' payments,
00:14:17
Speaker
is by using these, because open banking didn't exist 10, 15 years ago when most of them wrote their software, the only way they could make vendor payments is to work like a payroll company and say, okay, I'm going to just draw all the cash we need, I'm going to pre-fund all the payments I need to make on your behalf out of your bank account, Mr. Customer, and then I'm going to execute the payments on your behalf.
00:14:43
Speaker
because I can control my own checking account, I can control how the payments are made and make ACHs myself, and I don't need to talk to your bank, I can do that all myself. So they did that and then those software companies saw the opportunity to not only make money on subscriptions and software licensing in that space, but they're like, huh,
00:15:06
Speaker
You know, if we hold on to this cash for one night, we might make five million dollars in interest. If we hold on for two nights, we might earn ten million dollars in interest. You know, and so the amount of time it started to take to make customers payments were taking longer and longer.
00:15:24
Speaker
And if you go look out on the internet and search on some of the players in the space today, you'll find lots of conversation on public forums about how companies are really not trusting their AP automation companies anymore to make timely payments. And they suspect that they're holding onto their cash with these interest rates the way they are. So we saw the opportunity to say, look,
00:15:49
Speaker
we could take advantage of this open banking stuff and instead of pulling the cash into our hands, we leave it in the customer's bank account and we provide all the benefits of AP Automation, all of the workflow capability, but then when it's time to pay the vendor,
00:16:07
Speaker
we just signal the bank to make an ACH, or cut a check, or issue a virtual card. And so as such, customer gets to hold onto their cash for longer, and the customer gets paid. And so we see this as exceptionally disruptive in this space, that it's going to cause a lot of problems for our competitors, but really have great benefit to the end customer, as well as to the member banks
Impact of Digital Payments on Fraud and Security
00:16:35
Speaker
We sell our software through banks primarily and the banks have the opportunity to benefit by getting to hold on to customers deposits for longer, issue more credit cards, et cetera. Yeah, that's exactly where I was going to go with my next question, but I think you already covered it, which was kind of heard about the vendors. We got the software piece and then the roles of the banks. So you touched a little bit on
00:17:05
Speaker
kind of fraud and those types of things. In addition to what you mentioned a little earlier, is there anything else that you could point out in terms of why this becomes a better process or additional protections over certainly physical track writing? I mean, it's just obvious, but are there other fraud areas that should be of concern?
00:17:29
Speaker
So certainly I mentioned phishing and as you mentioned, check washing and check writing, just the old fashioned paper checks have become real security risks for companies. And then even paying with credit card
00:17:50
Speaker
over the phone and perhaps you probably wouldn't be surprised by how many companies are still just calling up vendors and giving out credit card numbers over the phone to make payments. There are a lot of new secure digital payment methods that
00:18:13
Speaker
that the market's not aware of. Even as we've talked to the Ohio Society of CPAs, it's things that they themselves and they know their members are not aware of. Are these the digital payment options like virtual cards, being able to issue cards directly to digital wallets without the opportunity for someone to intercede them, or
00:18:38
Speaker
you know, having the ability to send secure messages, send secure payments, digital card payments inside messages, you know, secure email messages is also just all of this is new technology that creates opportunity for companies to avoid fraud or if fraud does occur to detect it much, much earlier, get their arms around it and stop it before it, you know, becomes a big, big issue. Yeah, sure.
00:19:08
Speaker
So one of the things, as we kind of close here, we've kind of talked down into the weeds a little bit. So stepping back, thinking a little bit higher level, I mean, what are some of the ways that just digital payments in general can have an effect on the supply chain, particularly the relationships between all the different people in a supply chain? Can you talk about that a little bit?
00:19:36
Speaker
So some of that I mentioned earlier, right? Having control over how payments are made.
00:19:44
Speaker
You know, with digital payments, there have been a lot of changes even just over this summer. You know, the Fed has now enabled the banking system to do same day, to do same day real time payments. And so there's much, much greater opportunity through the banks to be able to
00:20:09
Speaker
to take advantage of those types of payment methods. So it's no longer just about check cash and ACH. Now with virtual card payments through
00:20:27
Speaker
through our partners like Visa, through the real-time payment options, companies have much, much greater opportunity to pay vendors electronically and more securely than they've been able to in the past.
00:20:48
Speaker
They also, you know, digital payments also offer just a lot more auditability and, you know, the ability to track them to know for certain that they've been delivered and delivered on time. Yeah, certainly. Having been a supply chain professional in current life, I mean, we always talked about inventory visibility, knowing where products were in supply chain. But I'm sure it's just as important to kind of know where the money is flowing, you know, both up and down. So
Podcast Conclusion
00:21:16
Speaker
that's right. Really interesting.
00:21:18
Speaker
Well, Steve, I want to thank you for your time. This has been a great conversation. I'm sure our listeners have learned quite a bit if they don't know much about AP Automation and this whole space and just really interested to hear about all the exciting things that Paper Trail is doing. So congratulations and wish you all luck in the future as you continue to grow. Yeah, thanks Doug. It was a great conversation. I enjoyed it. Great questions. So thank you. OK.
00:21:48
Speaker
Well, for anyone who'd like to learn more about Paper Trail, you can visit their website, which is paper trail TRL. It's papertrl.com. And again, thank you for listening today. Thank you for listening to The Market That Moves America. Never miss a new episode by subscribing anywhere podcasts can be found. You can also subscribe to our email newsletter at middlemarketcenter.org.