The approach to supplier payments with a big impact on your working capital efficiency

Global suppliers face cash flow hurdles with delayed payments, while buyers grapple with inefficient processes. A data-driven strategy accelerates B2B payments, enhancing working capital for mutual benefit.

Across global supply chains, both large and small suppliers rely on steady cash flow. However lengthy invoice approvals and late buyer payments strain their operations and ability to invest in growth.

Meanwhile for buying organisations, inefficient processes limit adoption of value-driving electronic payment methods such as virtual cards.  These cards provide suppliers faster settlement while generating rebates and extended days payable for the buyer.

However, simply launching a card program often falls short of expectations. Less than 2-3% of B2B transactions are card-based as broad attempts struggle to deliver supplier enrolment. This highlights the need for a targeted strategy driven by data.

As Vince Eavis of Paytech explained during our recent webinar, an analysis of over $5 trillion in corporate spend data reveals supplier payment preferences and a propensity to adopt new methods like virtual cards. This enables a targeted approach to convert more spend to cards.

However, as Giulio Rossi of Previse discussed, simply offering cards does not guarantee supplier adoption. Additional data analysis is key. By comparing actual payment timing to contractual terms at a supplier level, major gaps emerge despite perceptions that approvals and payments are timely.

For example, a supplier on 60-day terms may on average be paid 9 days late. And transaction-level analysis reveals even wider variances – some invoices paid over 100 days late.

Previse leverages this analysis to score each supplier’s propensity to adopt cards given the potential for more reliable, earlier payment. This factors in both the cash flow benefit of accelerating their existing late payments as well as the impact of even earlier, reliable, payments through an automated card program.

The scores enable targeting of suppliers where cards can drive the greatest value. By selecting suppliers with both high propensity and high potential card rebates/DPO improvement, the overall program success and returns are maximized.

Previse then provides the technology to automatically pre-pay the targeted supplier early without needing to wait for lengthy invoice approvals. This offers suppliers reliable, attractive payment terms that incentivise adoption. As more suppliers enrol, spend volumes increase – improving working capital and increasing rebate gains.

In summary, while many corporations strive for faster, card-based B2B payments, broad-based attempts often disappoint. But by tapping precise payment data along with AI, buyers can reliably accelerate supplier payments while capturing greater card program value and working capital efficiency. The data-driven approach marks the path to the full potential of modern B2B payments-with value for buyers and suppliers alike.

Related articles