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Can digital payments provide a lifeline for struggling businesses?

As costs skyrocket for everyone, businesses must look to drive internal efficiencies to protect their margins – could digital payments such as commercial cards provide a lifeline?

An economic crisis impacts everyone. Just as consumers have to manage their personal finances, businesses are scratching their heads as to how to balance the books – a sentiment made evident by new lows in UK business confidence. Profit margins are under significant pressure, with day-to-day costs such as energy bills turning the heat up on a business’ ability to keep its head above water. More widely, inflation is driving up the cost of expenses, and a weakening pound is increasing the cost of doing business internationally.

In more stable times, the answer to increased expenses would be to increase prices to maintain healthy margins. However economic turmoil will be hitting customers just as hard, so it’s unfair and unrealistic to increase prices and expect them to foot the bill. What’s more, this can leave a sour taste, and irrevocably damage business relationships. There is also no guarantee of keeping all your customers if prices increase – even a short-term cash injection is not guaranteed. So if price increases are off the table, what else can businesses do to weather the storm?

Instead of raising prices, look for where savings can be made. Downsizing, reducing equipment or staff costs can leave a business ill-equipped to recover when the time is right, so the area to focus on is in tackling inefficiencies. B2B payments are still widely managed via paper invoicing, an area susceptible to human error and hundreds of wasted hours. Digital B2B payments, however, can speed up internal processes, reduce costs and simultaneously increase cash flow – the lifeblood of any business.

Counting the cost of old-fashioned payment processes

Many business’ payment methods have remained largely the same for several years, or even decades. This is particularly prevalent in B2B, where many buyers still use traditional invoicing or BACS to pay suppliers.  

The problem? Traditional invoicing is slow, requires the management of large balance sheets and invoices by accounts payable (AP) teams, and is therefore prone to human error – which has the knock-on effect of needing more time and resource investment to monitor and correct.

Even when payments are managed correctly, the process is manual and labour intensive. Many businesses collect payments using legacy methods, by which a business calls or emails a supplier to make a payment. In cases of late payments, which are rife across many B2B industries, further cost is pushed onto the supplier as they have to chase up their creditors. Costs that, in times of economic strife, businesses can ill-afford to incur on a regular basis.

One solution businesses are turning to is commercial credit cards. By linking a commercial card to a payment platform, which can be seamlessly integrated into a back-office system via APIs, a business can extend its days payable outstanding (DPO) while minimising the supplier’s days sales outstanding (DSO) and decreasing the costs of cash collection.

Using commercial cards also give a business the ability to digitise its payments to drive further efficiencies. Straight-through processing (STP) is one of these technologies, allowing the buyer to ‘push’ a payment, rather than a supplier having to pull it in. This innovation reduces time on both sides and can even be automated in some cases to remove manual processes altogether.

On the supplier side, receiving payments faster eases the burden on accounts teams, who no longer have to chase up payments, and spend less time manually logging individual transactions and maintaining datasheets. This saves both time and resource, which can be better allocated to other parts of a business. The transparent, real-time, reporting data offered by many digital payments platforms is also key to this, as it enables businesses to have an up-to-date and clear view of cash flow for better resource forecasting and informed decision making. In the current climate, this is vital.

Getting money moving faster

Earlier this year, Barclays reported that three out of five UK businesses are owed money. In periods of prosperity, this is damaging to businesses; in times of recession, it can be catastrophic, and the difference between survival or insolvency.

Business payments have long been talked about as a future multi-trillion pound opportunity for digitisation. This is no longer true. The time for that opportunity is now.

Those that are still thinking about digital B2B payments as a distant prospect run the risk of falling behind fast. Global financial pressures mean the urgency for businesses to modernise has only increased; the need to improve cashflows and cut wastage is now under the spotlight.

This may sound obvious, but the best way for a supplier to alleviate the late payments pain is to make it as easy as possible for a buyer to make a payment. With a line of credit offered by commercial cards, this needn’t negatively impact the buyer.

Time to bring B2B payments into the 21st century

The success and proliferation of digital payments in a consumer setting has already proven that we have the technology to deal with a range of scenarios. Through innovations such as APIs, businesses have freedom and flexibility to hand-pick a payments platform and suite of solutions that best serves their business needs, and those of their customers.

As rising costs and inflation take their toll on profit margins, cash flow becomes critical to survival. Those that can do away with their lengthy, outdated inefficient processes are already one step ahead of the game in terms of maintaining a profit. From a long-term perspective, efficiencies created for survival today will present a competitive advantage in more prosperous times. Stronger margins mean that savings can be passed onto the customer, enabling a business to get ahead of those still suffering from slow and costly manual processes.

Of all the ‘tough’ business decisions that companies have in front of them in the current climate, digitising payments is no longer one. The technology is there, the market need is more urgent than ever, and B2B businesses in almost every industry are starting to wake up and identify the savings crucial to their continued operation.


Comments: (3)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 July, 2023, 14:07Be the first to give this comment the thumbs up 0 likes

Sorry but I'm not clear whether you're advocating commercial card to supplier or customer and about whose struggle will be reduced by taking your advice.

Benjamin Thurlow
Benjamin Thurlow - Adflex - London 02 August, 2023, 09:19Be the first to give this comment the thumbs up 0 likes

The benefits of commercial cards extend to both the buyer and supplier. Buyers can gain access to a line of credit to maximise their working capital and reduce days payable outstanding. And thanks to technologies such as straight-through processing, suppliers can be paid quickly to improve cashflow, which is vital during difficult times. When payments are faster, both parties benefit from better business relationships.


Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 02 August, 2023, 09:33Be the first to give this comment the thumbs up 0 likes

"Buyers can gain access to a line of credit to maximise their working capital": This is true only of tiny buyers who need to accept cash terms from suppliers. Any buyer above that gets 30-60-90 days free credit from the seller. Why would they use Commercial Card and pay Interest to improve their working capital?

"suppliers can be paid quickly to improve cashflow": Who wants to pay suppliers quickly? Whose cashflow?? Whose benefit??? It's all cool to use expressions like "better business relationships" but, in the real world, it's the fiduciary duty of the buyer to MSV by, among other ways, squeezing the seller for as much free credit as possible.

I'm sure there are business benefits of commercial cards but I'm afraid, these are not it.

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