Leveraging Digital Payments to Transform Business

How to expand your digital payments program to enhance cash flow, save money and help streamline processes


As many businesses start to bounce back after the pandemic, most are taking a closer look at how working capital continues to flow. That may include reimagining traditional business operations and financial processes to address changing customer and supplier needs. Digital payment initiatives—which had already shown strong signs of growth pre-pandemic—became imperative during the pandemic and were significantly accelerated. Now, businesses will likely expand or refine those technologies to remain agile and resilient in the face of continued disruption. 

In a recent Capital One and Morning Consult survey among 400 middle market financial decision-makers, 22% of respondents ranked payments technology as a top five area of investment today. And nearly one in four anticipated their payments technology investment would be a top driver of ROI in the next one to three years.

Here’s why now could be the right time to expand your digital payments program:

Digital and Card Payments Help Cash Flow

Elevating cash management processes and increasing cash flow is vital in making a successful comeback after the pandemic. Paying your suppliers digitally via ACH or a virtual card is typically good for them and for you. Your suppliers will get paid faster. You’ll be able to optimize your accounts payable (AP) strategy by consolidating payables to one card versus individual payments to each supplier. 

When paying by card, you can extend your days payable outstanding (DPO) without delaying payment to your suppliers, maximizing the time between the card purchase and paying the statement. Plus, you should be able to seamlessly qualify for early payment discounts, potentially saving even more money.

Accepting digital payments from your customers also delivers benefits for your business: shorter days sales outstanding (DSO). Paper checks can take 15 days to clear, which can push your DSO out by 45 days (assuming your client pays on time within 30 days). A digital card payment program means you typically get paid faster, which also improves cash flow.

Digitizing Processes Saves Time and Money

Digitizing AP and accounts receivable (AR) processes reduces inefficiency associated with the manual processes of invoicing, check processing and check insurance. It speeds up payments and enhances cash flow in your business. In addition, the rebates generated through credit card rewards and cashback programs help increase cash flow and profit.

Expanding your B2B payment program to include card payments can be a competitive advantage for your business. You’ll have access to important AP and AR data that helps you understand your cash position at all times and shows where you can tighten up your processes on saving and spending. This data also provides at-a-glance transaction visibility to understand who is paying on time and who is paying late, allowing you to handle customer relationships better.

Suppliers Are Open to Digital/Card Payments

Many suppliers appreciate digital payments because they get paid faster and can more easily forecast cash flow. They don’t have to worry about collection processes, and being paid digitally will streamline their AR to save time and money.

Organizations with cross-functional alignment among finance, AP, treasury and procurement are set-up to achieve program optimization. As the procurement team converses with supplier partners, they will be able to showcase how digital payments provide value and align to the strategic initiatives of the organization. After enrollment, a supplier relationship team can continue to engage vendors and manage payment terms on an ongoing basis with strategic partners and vendors.

To start onboarding suppliers to accept digital/virtual card payments: 

  1. Connect with your bank. They should have a supplier onboarding program that will help identify which of your suppliers already accept virtual cards or digital credit cards for payment. Your bank should support your business from program rollout through integration, share industry insights that you can deploy with your own program and help you evolve the program over the long term.
  2. Then, assess your remaining relationships. Once you have transitioned those suppliers to your digital or card payment program, identify those remaining suppliers with whom you have the best relationships. 
  3. Invite them to accept card payments. Explain the benefits of digital payments and the new tools or processes that will be available for them to use. 
  4. Begin educating hard-to-reach suppliers. Once those suppliers are on board, focus on your remaining suppliers to explain the benefits of virtual card payment systems and how they work.
  5. Define measurements and benchmarks. Your bank should be able to provide customized reporting capabilities and data analysis. These measurement tools can help you better understand your spend and help measure ROI.

Integrated Payables Can Boost Your Bottom Line

Digitizing payables is an effective way to increase business spend management for procurement and payments. Streamlining the integration of enterprise resource planning (ERP) systems with suppliers and banks, coupled with earning rebates or rewards, helps AP generate efficiencies and potential revenue.  

But digitizing payments isn’t a set-it-and-forget-it proposition. It requires consistent supplier onboarding and keen oversight on evolving payment technologies like virtual cards and real-time payments. Working with a digital-first bank and e-payables partner will help you streamline your integrated payables process, stay on top of evolving technology and maximize your bottom line.

 


For Informational Purposes Only

The information contained herein is shared for educational purposes only and it does not provide a comprehensive list of considerations or best practices. This information does not represent any opinion, guidance or recommendation, whether formal or informal, of Capital One, National Association, or any of its officers, directors, employees, advisors, attorneys, consultants, affiliates or subsidiaries (collectively, “Capital One”). Nothing contained herein shall give rise to, or be construed to give rise to, any obligations or liability whatsoever on the part of Capital One.

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