Three ways to improve payments processes and protect supplier relationships


 This guest post comes to us from Maria Parpou, Head of Product at Barclaycard Payments.

Over the past few weeks several well-known brands have come under criticism for late payments to their suppliers. As the Federation of Small Business stated last week, these smaller outfits “have seen their payment terms lengthened or cashflow held up as their bigger clients try to insulate themselves from the impacts of Covid-19.”

The speed of the payments process plays a pivotal role in the survival of many small businesses, and many thousands go under every year because of late payments. Corporations of all sizes rely on suppliers to provide specialist products and services so delaying payments to these businesses is a false economy.

As we navigate our way through this difficult period, improving and streamlining your business’ payments processes, is the most important thing you can do to safeguard your supply chain and future-proof your operations. Here are three ways we believe you can do that:

Implement quick “low-tech” fixes to speed up payments

Despite Government support loans for small and medium-sized companies, they will be hit hard by the economic impact of Covid-19. Over three quarters (77%) of small businesses surveyed by Small Business Britain say that cash-flow is their number one concern right now. For the survival of many SMEs, getting invoices paid promptly is therefore key. Yet our research shows that, on average, it takes three weeks between a company receiving and paying an invoice.

Now more than ever, larger companies must identify which suppliers need to be paid swiftly and implement a fast-track approval process to settle their invoices as soon as they can. This process could be a “low-tech” fix in the short term, simply because of the time pressures we’re under during this period and the difficulty of overhauling an existing system overnight.

One solution is to pay suppliers by card or, if you are a small supplier, switch from an invoice system that relies on bank transfers to one that accepts card payments. As a payments company, we have seen a huge surge in demand for card payment acceptance over the past few weeks. This can be set up very quickly and can ensure businesses are paid immediately for any services or goods they sell.

Use data analytics to understand your supply chain

Once we’re through this difficult period, companies need to look at how they can embrace the latest technology to re-organise payments to their suppliers in the most cost-effective and efficient way.

Data analytics can now be used to provide procurement departments with a comprehensive picture of their supply chain – driving cost efficiencies as result. Services are available that combine thousands of accounts payable data points with internal and third-party figures from external organisations, such as Company Watch, to help customers develop the right payment solutions for different suppliers, and in a fraction of the time it would take to do manually.

Such technology helps businesses catalogue their suppliers based on the number and value of transactions as well as their size, location and industry, and whether or not early payment is likely to generate savings. For companies with thousands of suppliers on their books – big and small – this can offer a significant time and cost saving for key decision makers.

Digitalise and streamline processes

There are many ways to embed payments within the procure-to-pay process so that they happen automatically when an order is fulfilled. This is similar to how marketplaces operate, whereby payment details are embedded within the purchase order and executed at fulfilment. A lot of business-to-business payments are now moving to this model, particularly for repeat orders.

As an example, Spend Matters has written previously about Barclaycard’s Precisionpay, a B2B platform that is designed to make it easier for companies to pay their suppliers. Through the system, businesses create a virtual digital payment card which allows card payments to be made to businesses that accept them, and bank payments to be made to those that don’t – whilst taking advantage of the cashflow benefits of a card product. Suppliers can be paid same day, and Barclaycard can be paid up to 56 days later, allowing buyers to take advantage of any early payment discounts.

In summary

Clunky supplier payments processes mean that businesses of all sizes are losing out on time and money. By implementing simple quick-fix solutions now and embracing more high-tech approaches in the medium term, companies can maintain vital supplier relationships, future-proof operations and ultimately keep smaller companies afloat.


Disclaimer: the opinions expressed in this article are those of the author and do not necessarily represent the official position of Spend Matters

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