To maintain a strong financial position, companies have been focused on ways to maximize working capital and cash flow. Recognizing the benefits of having more money on hand to invest in the business or distribute to shareholders, many large companies have been stretching out their payment terms to suppliers – often up to 60-100 days. While this may initially appear to be an attractive option, forward-thinking companies are recognizing that this approach is putting pressure on suppliers and can impact the financial stability of their supply chain.
Compounding the issue of extended supplier payments is the added time it takes to process an invoice manually. It typically takes two weeks for suppliers to prepare and send invoices and for buyers to enter it into their invoicing or other system. Then, the invoice still needs to be reviewed and approved before it can be processed for payment. All of this takes time, and it’s too easy for paper invoices to be misplaced or lost, further extending the timeframe for payment.
[For More On How Technology Is Transforming Commercial Payments: 2014 Forecast: Tech Trends in Commercial Banking]
These manual methods for processing invoices are all too common. According to The Global E-Invoicing Study Basware conducted with the Institute of Financial Operations in 2012, only 15 percent of companies are sending the majority of their invoices electronically. Advanced e-invoicing technologies are enabling companies to instantaneously send and receive invoices over a business commerce network, which connect nearly one million users worldwide. In addition to speeding up the invoicing process, the network increases buyer/supplier collaboration, enabling buyers and suppliers to view the status of an invoice and address any issues in real time. Technologies that enable scan and capture as well as virtual printing, make it easy for anyone to send and receive e-invoices – the first step in speeding up the payment process.
To further reduce invoicing time, companies are also implementing invoice automation. This technology is enabling them to expedite processing of invoices, with mobile capabilities that allow review and approval from anywhere. Added benefits of invoice automation include visibility across all invoices and a complete audit trail and controls that help to prevent fraud.
Payment Strategies Need to Be Win-Win
Some buyers welcome the opportunity to offer early payment discounts to their suppliers. Others who do not offer payment terms at the current time are missing potentially huge returns on their payables as well the opportunity to improve buyer supplier relationships by creating win – win cash flow scenarios for both parties.
A new significant payment trend is emerging that bears watching. It combines the speed and efficiency of invoice automation and business commerce networks with electronic payment networks. This new e-payment option ensures suppliers are paid fast upon invoice approval, without placing any additional burden on buyers. The new single global payment solution will not only simplify payment, but it will increase cash flow for businesses of all sizes.
With interest in increasing working capital and cash flow at an all-time high, companies are focusing on more effective payment strategies. To be successful, these strategies must provide strong incentives and benefits both for businesses and their trading partners. New e-payment solutions are accomplishing this – delivering increased speed, control and cost savings as well as increased cash flow – while improving buyer/supplier collaboration. These e-payment solutions will dramatically change the way companies pay and get paid – a win-win strategy for buyers and suppliers alike.
Bob Cohen is vice president, North America, for Basware, a provide of cloud-based payment and e-invoicing solutions for commercial enterprises.
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