Three ways Payment Automation can Improve Working Capital

Unless you are a streaming video or e-commerce business, your sales have probably declined — creating a negative impact on your working capital.

Accounts Payable is the proverbial “lowest hanging fruit” in affecting change to positive impact days cash on hand- but surprisingly most middle-market firms that I see tend to not manage this important metric closely, 70% of the time paying their invoices before the due date.

We are clearly in a recession and reducing costs and managing cashflow is a top priority for CFO’s. Here are three ways Payment Automation can improve your working capital.

Extending Payment Terms

We advise all our customers to migrate supplier payments to MasterCard virtual cards that earn you cashback. Any vendors that choose to remain on costly, inefficient paper check must wait to receive payment for 60 days or more, with no exceptions. Faster payments can still be offered to suppliers within 45 or 30 days via virtual card or ACH.

Finexio’s team manages this entire process for customers, including custom-built landing pages to streamline vendor payment terms extension changes.

Eliminating Paper Checks

On average, the typical middle-market firm is spending $150,000 annually just to pay their bills (think postage, banking fees, etc.), with larger firms spending seven figures! Our customers tell us that on average the cost of sending a paper check is $8 per check, including both printing and mailing costs as well as labor. It's surprising how most companies are still using physical labor to send paper payments when machines can easily do the job far more efficiently, with fewer errors and little to no cost.

Finexio’s customers pay nothing to send out checks- partly because half of them are eliminated almost immediately. What could you do with another $150,000 if it magically appeared in your bank account?

Maximizing Credit Card Usage

The majority of corporates have a purchasing card or corporate credit card for use for T&E as well as accounts payable spend, but only a fraction of the card eligible spend is captured. Accounts Payable staff does not have the training or bandwidth to canvas hundreds or even thousands of suppliers they work with to determine if they would take payment with a credit card. Every dollar put on a card is another dollar a CFO doesn’t have to disburse for another 30–45 days leaving valuable cash to put to good use elsewhere.

Finexio’s accounts payable payments as a service drives on average a 3x increase of cardable spend for customers and even has the technology to allow 100% of invoices to be paid with a card via Credx.

I’ve been advising C-suite executives for 12 years on Payment Automation strategies to improve working capital and cashflow. Please contact us if you would like to learn more best practices.

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