By Minella Dsouza, AVP — Geography Expansion & CRM— UAE (
)
The timing of making payments to suppliers has stretched increasingly and a recent survey by Atradius in the UAE cited that 60% of B2B invoices remain unpaid. These late payments are hitting suppliers harder thereby creating a domino effect in an already fragile ecosystem
Possible solution:
Commercial cards have always historically been used in its T&E or P-cards avatar where employees would use them during their travel or for online marketing campaigns and software subscriptions. However commercial cards have much more purpose than these and can become an excellent alternative to avoid dipping into your working capital to make supplier payments as they come with a 45–55 day interest free credit period.
For instance, you have a supplier that has offered 30-day payment terms and you engage with that supplier to accept a card payment and in return get paid in 7 or 10 days, thereby reducing their days sales outstanding,and providing the extra working capital that is incredibly important to them and doesn’t cost you anything either.
Apart from the cash flow boost to both parties, here are some more benefits that commercial cards bring to the table:
- Suppliers get paid faster and that calls for improved supplier relationships
- Streamlined operations that reduce administrative burden by replacing the manual efforts with cheques and automated reconciliations
- Extensive data on payments made that can be imported into ERP’s for a wholistic view on spends
Commercial card benefits for suppliers exceeds the perceived costs. Addressing the education gap with your suppliers is the first step towards motivating your suppliers to accept commercial card payments.
