(Re)-Prioritizing Payment in P2P (Part 2)

Earlier today, I commented on and provided some additional analysis behind Sohaib Masood’s analysis in the EBN article, Transferring Sourcing & Payment to the Cloud. The article is on the integration of payment into the broader strategic and transactional procurement equation, concluding that the current state of integrated purchasing and payment affairs is surprisingly disconnected. This is despite software that is doing a better job year-by-year linking transactional buying to end-to-end accounts payable automation and e-invoicing.

Yet perhaps there’s hope on the horizon. Sohaib notes: “Certainly going forward, sourcing and payment vendors are likely to innovate. For example, at least one vendor offers an alternative payment service network. With this type of service, buyers make all payments through the network. The supplier is given a choice of opting in to the network to receive electronic payment or remaining with a check-based payments.”

The opt-in / opt-out approach is a simple one, and it was the original basis of the Oxygen Finance closed-loop payment operating model (essentially a private card network without the card). Either you’re in or you’re out. And if you’re in as a supplier in the case of early payment, you’ve agreed to the specific settlement terms of the transaction at the point of previous steps in the buying process (e.g., PO creation, shipment of goods, receiving of goods, matching, etc. individually or collectively become the catalyst to drive the automated settlement at agreed upon terms).

This may sounds simple, but it’s not. And getting it right can allow you to do some pretty interesting things, such as discount reclassification (e.g., flipping discount benefits from savings to the top-line), which can allow organizations or governments to even securitize the discount component of future payables, since they know there will be obligations they have to meet. In other words, the payment mechanism could become the central component of a new asset class for companies and governments to borrow against.

Discuss this:

Your email address will not be published. Required fields are marked *