Electronic payments are at the top of the agenda for many CFOs. One reason for the importance of electronic payments in the eyes of CFOs is their ability to help CFOs achieve critical operational, working capital and spend management objectives.
5 Electronic Payment Metrics
Here are five metrics that have CFOs excited about paying suppliers electronically:
#1 Increase the Number of Payments Automated
Paper checks cost 30 times as much as electronic payments and are much more susceptible to fraud, studies show. That’s why CFOs are keen on increasing the percentage of check payments migrated to Automated Clearing House (ACH) or card settlement. Similarly, CFOs also want to grow the percentage of ACH transactions converted to card, which extend DPO and deliver cash-back rebates.
#2 Achieve Higher Percentage of Suppliers Targeted
CFOs increasingly recognize that addressing 100 percent of spending through electronic payments initiatives increases the chances of program success.
CFOs can achieve the high percentage of suppliers targeted that they crave by partnering with an electronic payments solutions provider that analyzes a buyer’s vendor master file, segments suppliers, educates corporate stakeholders, manages supplier outreach, updates supplier contact information, onboards suppliers, and provides ongoing supplier support.
#3 Instantly Extend Days Payable Outstanding (DPO)
DPO, one of the top metrics to CFOs, measures the average number of days it takes a business to pay its liabilities. Measuring DPO helps CFOs ensure that invoices are neither paid too early nor too late. Paying suppliers too fast sends cash out the door that the business may need for its day-to-day operations.
Once more, fast payment is akin to providing suppliers with a free line of credit. Conversely, high DPO may translate into having more cash on hand (free cash flow). Some virtual card programs enable CFOs to instantly extend DPO, in turn, freeing cash that can be used to pay down debt, make capital investments, increase research and development, and pay dividends to shareholders.
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#4 Earn Early Payment Discounts
Many suppliers prefer to be paid early in exchange for a discount on the invoice-due amount. In fact, businesses can offset the considerable cost of accounts payable overhead with early payment discounts earned on targeted spend.
It is no wonder that CFOs want to increase the amount of discounts or annual percentage rate earned.
#5 Earn Cash-Back Rebates
Businesses can earn rebates from payments made to suppliers via virtual credit card – a 16-digit credit card number that’s created solely to pay for a single transaction at a predetermined amount, but without a physical card.
The number of rebates available is tied to a business’ payment volume, so the more a business uses virtual cards, the more it is likely to get back. The potential for rebates is substantial for many businesses, making the value of cash-back rebates earned a more meaningful metric for CFOs.
In today’s increasingly competitive global economy, it is important for CFOs to be even more proactive in managing their financial operations and their cash flow to ensure continued growth.
Electronic payments deliver on five of the metrics that CFOs care about most.