Poor payment processes are bottling up profits
Friday, 20 Mar 2015
Vice President, Global Product Marketing
We saw from our research “Creating Payment Energy” last year – which was participated by over 1,000 strategic decision makers across Australia, Europe and the US - that there are still significant challenges for businesses in getting payments made on time and tension between cash management and efficient payment processes. The root cause of this is the myriad procurement and payment systems and processes that do not all integrate with one another.
Somewhere, one of them will create a bottleneck that’s stopping payments from going through on time. Our research shows that 84 per cent of companies pay their suppliers late. Most of the time, this is not because the funds aren’t there, it’s because the funds don’t make it through all of the processes in time, costing time, money and early payment discounts.
It’s an interesting paradox. We regularly talk about the benefits of executing early payments with customers and partners in the industry. Early payments can be used to increase cash flow, improve supplier relationships and help improve both companies’ financial positions. In this survey, businesses estimated that they could save 14 per cent, on average, of overall supplier spend with optimised payment terms. That’s a lot of money to leave on the table year over year.
Despite recognising the benefits – which 90 per cent of executives do – few companies are actually achieving them. That means that early payment discounts are out of the reach of 80% of businesses.
The average early payment discount offered is 8 per cent, though some respondents in the research said they would offer a 50 per cent discount or more in certain circumstances. In these instances, there are huge opportunities to change the fortunes of the business, not to mention the macroeconomic impact of timely supplier payments on the broader economy.
The lack of companies taking advantage of early payments is not due to failure to try, as evidenced by the fact that 44 per cent of businesses would prefer to pay early to achieve these discounts. The root problem is that 7 in 10 businesses report that process bottlenecks compromise their ability to access discounts.
Promoting faster payment
We know from the research, and from talking to customers, that only 1 in 5 businesses has highly automated processes in place to fully optimise invoice payments. Fortunately, while companies are working towards that – as well as for those that don’t want to take that step – there is another option.
Through our partnership with MasterCard we’re giving businesses like yours another chance to take advantage of early payment benefits: We call it Basware Pay.
Basware Pay combines MasterCard’s global network and innovative payments technology with the world’s largest open B2B network, Basware Network, to help companies avoid late payments.
“More than ever, global businesses rely on a complex network of partners and suppliers,” said Hany Fam, President, MasterCard Enterprise Partnerships. “Integrating invoicing and payments processes can take friction out of the system and boost the broader economy. Combining MasterCard’s global network and innovative technology with Basware’s industry-leading purchase-to-pay platform has the potential to enable transformative change.”
It’s frustrating when you have the desire and the means to do something, but you’re held back by processes. We want to put an end to that. In fact, we’re on a crusade to release this bottleneck in financial processes – and you’re welcome to join us!