Corporations of all sizes rely on suppliers to provide specialist products and services.
This is a precarious time for those smaller outfits, and payments processes play a pivotal role in their survival. The FSB estimates that 50,000 small firms go bust each year because of late payments. The economic impact of the pandemic will tip many more over the edge.
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 to do it:
1. 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 per cent) 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.
2. 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 reorganise 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. At Barclaycard we have a service that combines thousands of accounts payable data points with internal and third-party figures from organisations such as Company Watch, to help customers develop the right payment solutions for different suppliers – in a fraction of the time it would take to do so 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.
3. Digitalise and streamline processes
There are many pays 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
At Barclaycard, we have a product called 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.
It means you can pay your supplier today but pay Barclaycard up to 56 days later, just like you do when you use a credit card as a consumer. It also allows you to take advantage of any early payment discounts that your suppliers offer.
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. In a time of such challenging circumstances, implementing these measures has never been more important.
☛ Maria Parpou is head of product at Barclaycard Payments