Going digital: Why it’s time to put credit to work in B2B payments

Supplier payments are an often overlooked but major part of any medium to large-sized organisation. According to our research, half of the FTSE 350 have over 500 suppliers, and more than a third (38%) say they spend between £20m and £249m each month with these partners. These outgoings can leave a sizeable hole in working capital, impacting growth and financial stability. But until now, legacy payment processes have offered few solutions.

Fortunately, a digital breakthrough means finance teams can now pay their suppliers on time and maximise working capital, by tapping under-utilised commercial card credit lines.

Charting a course

Businesses today are afloat in uncertain waters. UK economic growth is predicted to rise little above 1% over the next year and even that is heavily dependent on the country’s future relationship with the EU. Weak household spending and business investment are likely to continue as long as the political uncertainty does, according to PwC. Against this backdrop, businesses need to chart a course for stability and growth. But that means fiscal responsibility, having enough liquidity to spend on essentials like hiring, R&D, acquisitions and other activities. 

Few CFOs might look at the state of their B2B payments operation and think there are genuine opportunities here to make improvements. There’s been so little innovation in the recent past that legacy processes are seen as just the norm. But they’d be wrong.

The credit benefit

Commercial card credit is often chronically under-used by businesses, despite offering relatively generous repayment circa 56 days before interest is charged. This can buy the company balance sheet some time whilst ensuring suppliers are always paid promptly. So why aren’t more businesses using it? In many cases because suppliers refuse to accept credit card payments.

Extra merchant charges per transaction, plus the cost of investing in card terminals, time-consuming reconciliation, and the burden of being forced to double key enhanced invoice data into software all add to the financial and admin burden. Some organisations, like HMRC, allow credit card payments but at a hefty surcharge of up to 2.4%.

A new way to pay

However, this isn’t the digital dead-end it once was. In fact, with modern payment platforms, CFOs can still maximise their commercial card credit use to pay all suppliers, even the ones that don’t accept cards. How is this possible? Innovative platforms like Invapay act as a kind of digital middleman, allowing the buyer to pay via credit card. Invapay receives the funds and then transfers them to the supplier via EFT.

Everyone wins. By paying all suppliers via credit card, in a buyer funded model, the buyer is able to extend days payable outstanding (DPO) and therefore maximise working capital. In a buyer funded model the supplier has a completely frictionless experience. In a negotiated supplier funded model, the supplier delivers a discount on their invoice for early settlement and this shortens days sales outstanding (DSO) to improve cash flow for the supplier. This will keep important supply chain relationships on an even keel, ensuring end-customers get the best possible service. Consolidating all payments onto a single automated platform will also help to streamline finance department processes, improving reconciliation and reducing manual overheads. For lenders, it’s a great opportunity to maximise clients’ utilisation of commercial credit cards.

To find out more about the opportunities for using underutilised commercial card credit to pay suppliers, read our eGuide: How commercial credit can create smart working capital

Contact details:

Bradley Eccleshare
Chief Marketing Officer

M +44 0 7525 929198
T +44 0 20 3892 4928

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.

Business Development: +44 (0)333 230 1842
Invapay Technical Support: +44 (0)3308 387 490
Press & Media: +44 (0)203 772 8842

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