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8 ways electronic payments are a better way to optimize cash flow


The idea of ​​cash floating has always made sense on paper – businesses keeping their cash as long as they can in payment cycles to earn interest and improve cash flow. But now, even with historically low interest rates on the rise, that ship has sailed. The money one could make by clinging to cash today is not much; not to mention the negative effect this has on your suppliers.

While maintaining strong supplier relationships should always be a priority, it has never been more important given today’s supply chain issues. Suppliers rely on quick access to payments to finance the production and distribution of the goods businesses depend on to deliver to their customers. Not only will prompt payment help suppliers maintain a healthy pipeline, but it can also help companies gain favor and become preferred customers.

A better way to optimize cash flow

Fortunately, there is a much more efficient approach that businesses can use to manage cash flow and generate savings: electronic payments or electronic payments. Not only do electronic payments provide businesses with new ways to save money, but they also improve AP operations and satisfy suppliers.

It’s easy for businesses to accelerate the adoption of digital payment using an AP automation platform. They may offer vendors a few different payment methods, including ACH and virtual cards, which are processed the same as traditional credit cards but offer enhanced security. Plus, by using payment partners to manage the necessary steps, such as onboarding vendors, determining how they want to be paid, and responding to routine inquiries, businesses don’t have to do very little to benefit from the advantages offered by electronic payments.

Given the drawbacks of checks, electronic payments are becoming an increasingly popular method of payment. Here are eight reasons businesses are saying goodbye to float and hello to electronic payments:

  1. Control of payment deadlines. When companies implement electronic payments through an AP automation platform, they have precise control over who to pay and when. Even though electronic payments are faster, businesses can determine exactly when payments are initiated, so they can take advantage of early payment discounts, optimize cash flow, and always pay suppliers on time.
  1. Efficiency equals savings. Preparing checks, approving them, signing them and mailing them is a time-consuming and inefficient process for your staff and includes the fixed costs of check stock, printer ink and stamps. All of these inefficiencies disappear with Accounts Payable automation where vendor payments can be made with a simple point-and-click. Electronic payments also offer efficiencies for suppliers. With virtual card payments, payment information is included with the payment, providing faster and easier reconciliation for vendors.
  1. Valuable discounts. In addition to reducing processing costs, virtual cards also offer cashback. These funds can offset the cost of automating APs and, in some cases, even transform APs from a cost center to a profit center.
  1. Efficiency inside and outside the company. Processing efficiency and the ability to see the status of invoices and payments offers benefits across the enterprise. Treasury can manage cash flow more efficiently and accounting can prepare monthly closings more accurately and quickly. Likewise, suppliers gain visibility into the timing, method, and other details of their payments through a supplier portal, not just for one company, but for all of their customers using the platform.
  1. More security and peace of mind. Many businesses are turning to electronic payments because of the added fraud protection they offer. According to the 2021 AFP report on payment fraud and control, 66% of businesses using checks have experienced actual fraud or attempted fraud at some point during the year. This contrasts with 34% of businesses using ACH and only 3% using virtual cards. These cards offer enhanced security practices with random numbers authorized for one-time use.
  1. Visibility drives continuous improvement. Automation provides visibility and efficiency across the entire AP process, from processing invoices and routing approvals, to scheduling payments and confirming receipt of payments. AP teams can see, for example, if an invoice is stuck pending approval and act accordingly. This visibility is also essential to enable AP analysis and reporting to optimize processes, reduce administrative costs and better manage cash flow.
  1. Speed ​​is the new king. The “cash is king” mantra is sacrosanct, and your suppliers depend on it to keep production flowing. However, the amount suppliers receive is only part of the equation; when they get it, that’s key too. As you focus on building supplier relationships, keep in mind that speed of payment is critical to healthy cash flow and is a key metric that suppliers look at when they prioritize delivery to customers.
  1. Reduce the headaches of supplier enquiries. Some payment providers offer a dedicated team to handle supplier requests. Not only does this ease the workload on the AP department, but it also gives providers quick and easy access to someone who is focused on handling their requests. Additionally, some accounts payable automation solutions include portals that provide suppliers with an easy, self-service way to check the status of payments for all of their customers using that system.

Using float as a money management tool is an outdated and inefficient practice. Electronic payments are quickly becoming the most efficient way to not only optimize cash, but also increase the speed, efficiency, security and even profitability of your suppliers’ payment process. The future of business is digital and world-class companies are recognizing that electronic payments are not only a necessity for the new reality, but also a key competitive advantage.