CPOs around the world are looking to implement best practices. A key component of this is effective supplier management because good relationships help your partner to find solutions for a range of issues. Half of all small suppliers in the UK were paid late last year, according to the Federation of Small Businesses. And nearly one-third of these companies said the delays led to reduced profitability and limited their growth. So how can you help your suppliers' cash flow? One often overlooked opportunity is to improve your accounts payable (AP) processes. Traditionally, payments for purchases and services were processed with paper orders, invoices and approvals. Streamlining of this process began about a decade ago with the introduction of payment cards.
Today, these programmes have developed with the use of virtual card account solutions, such as MasterCard Purchase Control, in which fixed monetary values, time limits and unique one-time use numbers, instead of physical cards, are used to make payments. These provide a high level of control, security and efficiency, while still helping your suppliers with their cash-flow needs.
Virtual payments have been highly successful in many different industries.
However, the biggest opportunity for CPOs is for general AP. The use of virtual accounts to pay suppliers, instead of cheques or direct transfers, has grown massively in the US, with more than 50% of corporations that use purchasing cards also using virtual accounts for AP. Many people expect firms in Europe and Asia also to adopt virtual accounts.
The next trend is the integration of electronic invoices with payment solutions based on virtual accounts. MasterCard and Basware joined forces last year to develop innovative solutions to address the issue of
late payment to suppliers caused by slow invoice approval and payment.
The bottom line: as you look to implement best practices across your business, remember that relationships with suppliers matter. Since cash flow is so important to them, this is an ideal place to start.
David Peraino is group head of B2B payments at MasterCard
Members can read a feature on the future of payments here.