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Five ways to unlock the power of payments

Supplier payments may traditionally have lagged behind the consumer space when it comes to innovation, but that is changing. Thanks to new digital platforms, finance chiefs have an opportunity to modernise. During the current pandemic, there’s no better time to find new ways to cut costs and drive new sources of revenue. Here are five quick wins:

  • Pay on time

In 2019, nearly half of all invoices were not paid to the agreed term for SMEs*. Buyers may have their reasons for this, but there’s no denying that it ends up creating unnecessary extra work — calls to the AP help-desk and executive escalations. That’s not to mention damage to supply chain relationships. That goodwill between partners may be needed in times of difficulty. With digital platforms, there is no systematic barrier to paying on time.

  • Equalise the control

With traditional push payments the recipient often doesn’t know when they have arrived, which can lead to wasted effort chasing buyers for money. Digital pull payments equalise the control. The buyer is in control of initiating the transaction, as with legacy push payments. But then as soon as the pull payment token is received, often immediately, it can be authorised, meaning the supplier is paid. At this point, the supplier is in control: they can seek authorisation whenever they want and are confident that they will be paid promptly.  No more waiting for the infamous buyer payments run.

  • Add meaningful data

All too often buyers use their own reference information in the payment, or no reference at all, so the supplier has no knowledge of what the payment was for, other than the amount. If they send remittance information to the supplier this can create even more admin work, as it rarely arrives at the same time and via the same channel as the payment. With digital payments, useful information like invoice number can be included with the payment instruction, so that both parties can automate – AP reconciliation for the buyer and AR reconciliation for the supplier. Timely reconciliation of money in and out is essential for well-run businesses to manage their cash.

 

  • Avoid unnecessary risks

Legacy payments often require the supplier to register their bank details with the buyer. This makes supplier on-boarding cumbersome and places an extra burden on the buyer to keep these details safe. The buyer might also be defrauded by a scammer impersonating a supplier, who tricks a finance team member into updating their details. Meanwhile, the supplier is constrained in managing its own banking arrangements as a change of lender to get better terms would require an onerous manual process to update this reference data in all customer systems. Some modern payments alternatives operating via pull payments, don’t require the buyer to store bank data, reducing fraud and data security risks and administrative overheads.

  • Find self-funding solutions

Digital transformation in payments can be hard to drive, because business change initiatives tend to be weighted towards regulatory and customer experience over finance and the back office. Stakeholders are unaware of how much they are losing out with current legacy systems and how much faster, lower risk and lower cost payments alternatives could be.
This challenge can be resolved immediately by choosing a digital solution which offers rewards on each transaction. Such income generating solutions are ideal for cutting through corporate project justification inertia because they’re essentially self-funding. The costs of implementing the change can be covered many times over from the income the company receives in return.

Once the other benefits are considered, the case for digital B2B payments becomes compelling.

To find out more, read Optal’s eGuide: Do you have a VAN plan?

*Research conducted by BACS November 2019.

Contact details:

Bradley Eccleshare
Chief Marketing Officer

M +44 0 7525 929198
T +44 0 20 3892 4928
bradley.eccleshare@optal.com

About Optal Ltd

Optal is re-inventing how payment processes work across complex industries. By stripping payment processes of their customary inefficiency, Optal helps companies boost profitability across a growing number of sectors around the world.

Optal issues Mastercard branded payment products, driving its focus on developing and bringing to market, game-changing payment solutions. Optal’s working capital solution, Invapay, turns underutilised credit lines into a dynamic resource to manage cashflow.

“Invapay” and “Invapay solution” means Invapay Payment Solutions Limited, a private limited company in England and Wales, authorised and regulated as an Authorised Payment Institution by the Financial Conduct Authority under the Payment Services Regulations 2017 which is a wholly-owned subsidiary of Optal Limited.

Talk to us to discover how Optal can add value to your organisation.

General Enquiries: +44 (0)2038 924 928
Invapay Technical Support: +44 (0)3308 387 490

info@optal.com

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