Early bird catches the worm – how early pays can affect the cash flow
Thursday, 5 Nov 2015
A couple of weeks ago I wrote a post about the findings of our recently published commissioned study conducted by Forrester Consulting on behalf of Basware titled, “The Total Economic Impact of Basware Purchase-to-Pay (P2P) Software Solution”.
Product Marketing Manager, Sales Enablement
In this post I would like to examine more closely the topic of early payments, which was also addressed in the study.
Although Basware offers a variety of Financing Services solutions to optimize working capital for buyer organizations, there are more “traditional” ways to improve cash flow as well.
Automation can help unlock early-pay discount opportunities
Before implementing an Accounts Payable solution, the key challenge companies have with invoice processing is that approval cycles tend to be really long. This has to do with the fact that it is difficult to identify the correct person for approvals and each process step (coding, approval, payment) takes time. Therefore, capture of early-pay discounts are rarely an option.
The bottom line
Not all suppliers provide early-pay discounts but for the composite organization in the study, 20 % of total spend was eligible for early-pay discounts at an average discount rate of 2 %. Prior to implementing Basware’s Purchase-to-Pay solution, the composite company achieved only 30 % of available early-pay discounts, which increased to 80% over three years.¹
In the study, a Manager, finance at a large manufacturing company, states:
“We systematically go after achieving early-pay discounts. In the past, we captured about 50% of all early-pay discounts that were available to us; with Basware, we were able to push it to 95%.”
To learn more about what kind of cost savings and efficiency gains companies are able to achieve with optimizing their Purchase-to-Pay process, download the study here »
¹The Total Economic Impact™ of Basware’s Integrated Purchase-to-Pay (P2P) Software Solution (September 2015)