The five steps to highly effective payment processes

Senior Product Marketing Manager

If I said to you that you could cut a business’s overall financial expenditure by 14 percent and improve your supplier relationships at the same time, would that get your attention?

Recent research conducted by Basware and MasterCard among over 1,000 strategic decision makers within finance globally revealed that it's entirely possible, simply by taking advantage of early payment discounts.

At first glance, the obvious response might be that businesses are cash strapped and don't have the liquidity to pay suppliers early. However, almost half (48 per cent) of businesses surveyed said they have more cash in the bank compared to a year ago, with only 11 per cent in a weaker cash position. Rather it seems that processes are one of the biggest hurdles, as over half of respondents admitted that internal bottlenecks are what prevent them from taking advantage of these discounts.

These savings are only one of several advantages that can be realized when an organization optimizes its working capital and extends the value of its financial processes. Timely payment can also help reduce credit lines, enable more invest in the overall business, cut resources used on payment settling and improve relationships with creditors and banks.

Moreover, by automating invoicing and payment processes and connecting to eco-systems such as the Basware Network, companies can improve their cash flow, ensure smoother payment cycles and build stronger relationships between buyers and suppliers across supply chains.

But let’s not divert from today’s post topic by focusing solely on B2B networking: Inefficiencies in finance processes and an inadequate set of relationships – internal and external – can lead to cash reserves sitting gathering dust, increasingly frustrated suppliers and even wider economic stagnation.

In light of this we've developed a five-point plan to respond to the key findings from the research:

  • Challenge Bad Habits - Start by reviewing the overall payment strategy by considering and evaluating the benefits of all the tools used to support cash flow – credit, discounting, factoring, payment terms, etc. The commercial value of such measures should be evaluated and demonstrable
  • Strategic Stalling - Consciously holding off payment for goods and services is not a sustainable strategy. In the short term, extending payment terms might help to solve cash flow problems, but in the long term, this could be potentially damaging (to you and your suppliers), so plan your payment processes and credit services carefully with a strategic goal in mind
  • Get Connected, start B2B Networking - Look for ways to build more effective relationships with suppliers and partners, to ensure that their cost models and risks are also being taken into account. A good approach is to join an open eco-system that operates globally – it will provide you with immediate access to suppliers, partners and peers
  • Segmented Metrics - One size doesn’t fit all. Metrics around discounting and cash flow management should allow for the diversity of a supplier or customer base
  • Partnerships in the Eco-system - Revisit accounting processes, payment practices and other touch points in the light of an evolving, ecosystem-based market landscape, and look for opportunities to build in flexibility

All companies know the value of cash, but a company's value is ascertained by far more than just its bank balance. These five steps can help provide a clearer view of the status of the business and put it on the front foot when it comes to payment processes.

In conjunction with these, Basware's recently launched Financing Services are designed to allow businesses and suppliers to optimize cash and working capital through digital participation in the Basware Network.

In some cases buyers can extend days payable outstanding with negligible cost and in other cases, can reap the rewards of early payment discounts. Suppliers in all cases get paid early, have more control over when they get paid and all parties have better visibility into the total process, making for less time spent chasing and being chased. It’s a cliché but everyone wins.


Category: Financing Services