UK CFOs are muted about current prospects for growth. Thanks to continued political turbulence and weak domestic demand they’re focusing more than ever on hunkering down and reducing costs. It’s an understandable response to current economic trends, but may result in cuts to the workforce, R&D, marketing budgets and more which could negatively impact business success in the long run.
Few may be aware of the huge opportunity in B2B payments for stripping away cost and inefficiency, and in so doing, driving improved margins that can set the business up for success – even in challenging times. Yet this is exactly what new digital payment systems offer.
UK firms are facing three major pressures this year, according to Deloitte’s latest CFO Survey for Q1 2019. Growing economic headwinds are making finance bosses more negative about growth prospects. Cost pressures are rising, with a record 79% expecting operating costs to climb in the coming year – driven by average earnings increasing at their fastest rate for 11 years. And both credit pricing and availability has declined over the past two years.
As a result, risk appetite is close to its lowest level in nine years, while most CFOs expect a decline in corporate revenues over the next 12 months. In this context, the number one corporate priority for UK firms over the next year is cost reduction (53%).
Supplier payments have long been a drain on corporate resources. Yet for too long they have been overlooked by CFOs – viewed merely as a cost of doing business. That’s despite the huge sums being ploughed into B2B payments. The FTSE 350 organisations we polled spend a total of £50m annually on reconciliation alone. Inefficient, legacy payment processes, human error and bank charges add to the financial burden. The knock-on effect of payment problems can damage key supply chain relationships and ultimately even lead to customer attrition. On average, large organisations misdirect payments worth £3m each year and a massive £40bn is paid late.
B2B payments may once have been a cost of doing business. But that doesn’t have to be true today. Modern, digital-first platforms offer a new approach which could help finance teams preserve key supplier relationships, whilst optimising payments and improving margins.
One such approach is the use of Virtual Account Numbers (VANs): single-use, 16-digit card numbers that can be used to pay suppliers quickly and efficiently. Reconciliation is automatic and immediate, payment is quicker than by cheque or bank transfer, and extra data can be added to each payment to improve auditability and reduce fraud risks. Most importantly, it’s a seamless digital process that removes costly human error from the equation as well as other admin overheads like the cost of printing and posting cheques.
Organisations can even get rewards on each transaction, turning a traditional cost centre into a new revenue stream.
To find out more on how Optal VANs can make payments pay for your business, download our latest e-guide, Payments Alternatives.