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The Innovative Way To Optimize Cash Flow & Working Capital

Posted October 11, 2016


For companies today managing cash flow and working capital is often a challenge with the need to manage the monetary requirements of your own business against the need to pay suppliers according to agreed timelines.

The method you choose to pay suppliers can be crucial in helping you successfully manage these competing needs and can even help your business have better control over cash flow and working capital.

How can virtual payments help your business with cash flow and working capital?

  • Access a credit line at no cost - Pay your suppliers immediately while you only need to settle your virtual payments account at a later date. This gives your business much more flexibility regardless of whether you are awaiting payments from your customers for goods/services or you want to invest cash into your business or assets.
  • Qualify for early payments discounts - Pay suppliers earlier without hassle: as soon as payment details are sent to and processed by the supplier, the payment is received. Suppliers often offer discounts for early payments and virtual payments allow you to qualify for these which reduces costs for your business and consequently increases working capital.
  • Earn money on payments made - Get money back on payments that you are already making, giving your business access to an extra revenue stream to enhance cash flow and working capital.
  • Save on international payments - Optimize the way you pay international suppliers to avoid unnecessary costs such as FX rate mark ups and cross-currency fees, typically saving you around 3% per transaction. These savings reduce the cost of paying suppliers therefore improving cash flow and working capital.
  • Improve reporting with enhanced data capture - Customize the data that you capture around payments made which can be used to improve reporting. Easy, instant invoice tracking and auto-reconciliation also facilitates improved reporting and frees up resources in your accounts payables team.

Why are credit-funded virtual payments the best way to manage cash flow and working capital?

Many industries are being forced to evolve rapidly with economic, political and technological factors all putting increased pressure on businesses. In order to survive you need to constantly look at the way you operate to ensure that you are equipped to adapt to changes effectively and efficiently. As you respond to these challenges, choosing the right supplier payment solution is a key enabler of success and access to credit is central to this.

While credit can be obtained from suppliers, negotiating extended payment terms may not be feasible with many businesses now always requiring payment in advance or within a short time after goods or services are delivered. The time and effort of negotiating on payment terms may not be productive and could even have a negative impact on supplier relationships. Such terms would also mean that you do not qualify for early payment discounts.

Virtual payments give you access to interest free, unsecured credit via trusted payment providers and allow you to pay suppliers straight away, taking advantage of early payment discounts where available while improving cash flow.

Traditional supplier payment methods, such as corporate credit cards or lodge cards, bank/wire transfer or check payments, may give you access to credit from your bank but these methods simply do not give you the agility that your business needs to succeed. Traditional methods rarely allow you to earn on payments made, can prove costly if you are paying international suppliers and reconciliation can be time consuming and reporting abilities are limited.

How should you approach suppliers about accepting virtual payments?

Any supplier who is able to accept credit or debit card payments will be able to accept virtual payments. Virtual payments are single-use MasterCard or Visa cards so can be accepted via existing services.

While there is a cost for suppliers to accept credit card payments, your supplier will take advantage of the following benefits which may outweigh the cost:

  • Receive payment for goods/services earlier - With virtual payments suppliers can be paid immediately avoiding late payments and increasing cash flow for the supplier.
  • Avoid costs for accepting payments in foreign currency - If you are paying international suppliers, virtual payments enable you to save your supplier money by paying in their local currency avoiding fees for accepting foreign currency payments.

If the benefit of early payment does not negate the charge that will be incurred for accepting the payment there may be opportunity to come to an arrangement to facilitate the reduction of the fee, for example passing on the money you earn from using virtual payments.