How AP Payments as a Service Drives Business Growth

As economies slowly reopen, businesses of all sizes are ready to grow again.

And CFOs are leading the way, spending more time finding and funding new sources of value and migrating finance from a tactical to a strategic function that can support business growth. CFOs are discovering that accounts payable can play a big role in driving business growth.

Rethinking the way that the business pays its suppliers can free up cash that be reinvested in growth-generating initiatives such as research and development, new facilities, and global expansion. That’s why more businesses are deploying AP Payments-as-a-Service.

AP Payments-as-a-Service makes it easy for businesses of all sizes to pay their suppliers in their preferred method. Buyers enter payments into their accounting system just like now, but instead of selecting “Print,” the buyer selects “Pay.” Payments are debited from the buyer’s bank account to a trust account for secure funding and verified funds and remittances are disbursed to suppliers.

Free Up Cash with AP Payments-as-a-Service

AP Payments-as-a-Service can be a powerful tool in freeing up cash. Here’s how:

Reduced operational costs.

Paper checks cost 30 times as much as electronic payments, studies show. Paper checks require staff to print, sign and mail paper checks, replace lost checks, respond to supplier inquiries, reconcile payments and invoices, and add staff as volume increases. Checks also are responsible for more fraud losses than electronic payments. The money by migrating from paper checks to electronic payments can be reinvested in projects that yield long-term growth, such as purchasing inventory.

Extended Day’s Payable Outstanding (DPO)

Paying suppliers via certain card programs enables CFOs to instantly gain new cash flow without requiring any changes to a supplier’s existing payment terms. Since the funding for the card program is provided by the buyer’s bank, and the payback period only kicks in once the payment is initiated, businesses can gain 30 days of new cash flow by using a card to pay suppliers. Extending DPO provides growth-minded CFOs with the cash their business needs to pay down corporate debt, make capital investments, increase research and development, or support other growth initiatives.

More Opportunities to Capture Early Payment Discounts

The faster cycle times facilitated by AP Payments-as-a-Service makes it easier for buyers to capture early payment discount offers from suppliers. Capturing more early payment discounts provides CFOs with risk-free returns on the business’ cash. Businesses achieve an average 2 percent return on the invoice due amount on payments made early, per the Institute of Finance and Management (IOFM). But many organizations in industries such as biotechnology, pharmaceuticals, consumer packaged goods, high tech consulting earn even higher early-payment discounts, IOFM finds.

Supply Chain Financing

It doesn’t always make sense for a business to use cash from its balance sheet to pay suppliers early. That’s why some AP Payments-as-a-Service providers offer supply chain financing. The technology identifies early payment discount offers that aren’t be captured, funds the early payment in exchange for the discount offered by the supplier, and accepts payment from the buyer at term. The buyer gets to share in the discount earned by the AP Payments-as-a-Service provider, without paying the supplier early. Buyers can reinvest the revenue share earned through supply chain financing into their business.

Cash Flow Analytics

AP Payments-as-a-Service provides CFOs with real-time visibility into critical working capital and spending metrics such as accruals, spending per supplier, department spending, DPO, late-payment penalties, percentage of early-payment discounts captured, percentage of payments made electronically, cost per payment processed and more. These types of metrics help CFOs manage and forecast their company’s cash flow.

More Time for Growth-generating Activities

The efficiencies provided by Payments-as-a-Service frees AP and finance staff to focus more on growth-generating activities such as analyzing data, collaborating with stakeholders, and building relationships with strategic suppliers. Staff no longer are burdened by transaction processing tasks such as printing and mailing checks, fielding supplier inquiries, and reconciling multiple bank statements.

Cash management is essential to business growth. That’s why businesses want their CFO to break out of their traditional role as a financial scorekeeper and uncover opportunities for growth.

AP Payments-as-a-Service provides CFOs with a valuable tool for driving business growth.

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