Paying more suppliers electronically has moved up the accounts payable department’s agenda.

And for good reason: compared to paper checks, electronic payments cost less, result in fewer errors, are timelier, provide buyers and sellers with better visibility, and result in considerably less fraud.

How CFOs Benefit from Electronic Payments

But some accounts payable leaders are reluctant to bring up electronic payments with their CFO for fear that they won’t like the idea.  The reality is that CFOs love electronic payments for four reasons:

1.) Higher Profit Margins

Some providers of electronic payment solutions eliminate the costs associated with paying suppliers from Day 1.  Electronic payments also streamline payment operations. A single payment file upload initiates payment to all a buyer’s suppliers; instructions are parsed, and payments are automatically remitted in all payment methods.  This eliminates the need to log in to multiple banking systems and wipes out the costs of printing and mailing paper checks. What’s more, integrating electronic payments with the general ledger of an ERP platform provides real-time payment reconciliation that eliminates the keying of data or the decoding of banking messages.  Additionally, advanced payments solutions automatically track approved and initiated payments and any rejects, with detailed payment and reconciliation reports integrated into the buyer’s ERP system. This end-to-end tracking enables more accurate accrual reporting, greater payment reporting integrity, and better visibility into spending based on the metrics most important to the CFO.

2.) More Opportunities to Capture Early-Payment Discounts

Eighty percent of suppliers are willing to exchange discounts on the amount due on an invoice in exchange for early payment, IOFM reports. The earlier the payment, the larger the discount. Unfortunately, it takes so long for accounts payable departments that operate in a manual environment to approve invoices that discounts for early payment are out-of-reach.  Whether it’s opening mail, keying invoice data, shuffling invoices to approvers, or tracking down lost or misfiled invoices, every step in a manual invoice approval process takes too long. Accounts payable departments are literally leaving money on the table because of slow invoice approval cycle times.  The average discount that suppliers offer for early payment is 2 percent, IOFM’s 2017 P2P Benchmarking Study finds.  The faster cycle times enabled by electronic payments create more opportunities for capturing early payment discounts.  In fact, highly automated accounts payable departments capture seven times more early-payment discounts (as a percentage of spend) as their peers, per The Hackett Group’s E-Invoicing Benchmarking Study.  That means that a $1 billion-revenue company that previously captured $200,000 annually in early payment discounts may gain $1.4 million a year in additional discounts.  

3.) Better Working Capital Management

Paying suppliers electronically provides CFOs with critical insights into cash flows, corporate spending, and operations performance.  CFOs can drill down into cash flow information, analyze issues, and uncover opportunities for driving corporate profitability. Advanced solutions empower CFOs with real-time access to invoice and payment data, making them self-reliant and agile in their financial decision-making.  Advanced invoice-to-pay solutions provide CFOs with actionable cash flow insights such as:

  • On-time payment percentage
  • Spend visibility and trends
  • Spend-to-supplier ratio
  • Accounts payable value and volumes
  • Accounts payable process metrics
  • Payment and discount capture metrics
  • Team productivity metrics

4.) Lucrative Cash-Back Rebates

What really has CFOs at mid-sized businesses excited about electronic payments is the opportunity to earn cash-back rebates on payments made via virtual card.  It is not uncommon for businesses to earn cash-back rebates on 30 percent of their spending. In some cases, the cash-back rebates earned by businesses have single handedly transformed their accounts payable department a profit center.  The money earned through cash-back rebates can provide CFOs with the money to automate invoice processing.

Higher profit margins.  More early payment discount opportunities.  Enhanced working capital management. Lucrative cash-back rebates on payments made via card.  These are the types of things that keep CFOs up at night. And they are all addressed by paying more suppliers electronically.

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