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Posted February 9, 2016

payment strategies

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A new trend in the world of corporate travel is the immediate payment. While travel programs administered in-house or through a travel agency typically take advantage of early payment discounts, demand from suppliers for immediate payment-in-full at the time of booking is sparking significant change. This evolution in payment timing—payments are expected “now,” in real-time, in order to secure a reservation—is challenging travel managers, especially those still using more traditional payment methods like checks, to re-think their payment strategies.

Suppliers’ Payment Terms Driving Change

The “Cash on Delivery” or “Payable on Receipt” invoice payment term, as opposed to the more customary “2/10 Net 30” or the like, is being adopted by industry suppliers who depend on the up-front funds to manage both their inventory and cash flow. These suppliers rely on these more aggressive payment terms to continually offer low prices and ensure their profitability. And offering discounts in exchange for immediate payment is a proven way to build value and make budget-minded corporate customers happy.

Earlier than Early? When it Pays to Pay in Full At Time of Booking

The financial gain from discounts notwithstanding, immediate payments aren’t necessarily convenient or even favored by corporate travel buyers. Paying in full might put pressure on their AP process and working cash flow. Yet, when crunching the numbers, they’re finding that the combination of a low enough reservation price and a large enough immediate payment discount gives them reason to embrace the new terms.

Accommodating immediate payment terms comes down to meeting real business needs. Like all business expenses, those earmarked from travel programs are subject to budget scrutiny. Travel managers seek out the best prices and payment discounts so they can maintain an operationally cost-effective process and deliver value back to the bottom-line.

Carpe Diem

In today’s travel booking environment, the best deals oftentimes need to be captured “now,” and if the supplier requires full payment, the travel manager has limited options. Traditional payment methods like check, wire transfer, or cash won’t fit the bill. And business travelers’ personal credit cards aren’t always a viable solution, thanks to the company’s T&E policy and/or personal credit limits. The challenge with corporate credit cards is they usually carry a limit that’s easily met when bookings are paid in advance of the trip, especially if there are multiple business travelers involved.

For these reasons and more, virtual credit cards are becoming a popular solution. When using the electronic, completely paper and plastic-less payment method, travel managers no longer have to miss out on great prices. And they’ve eliminated the need for to route a check request through AP. Virtual cards are accepted by most suppliers—those who accept plastic cards run through the well-known credit card networks—and they’re global, to boot. Their merchant acceptance adoption, in fact, is being driven in-part by this issue of immediate discounts. They’re a solution that really tackles the challenge—or the opportunity—presented by immediate payment requirements.

Automatic, Immediate, and Paid-in-Full

Leveraging discounts is a tried-and-true practice for travel managers, and immediate payments are taking money-saving to the next level. Aside from locking in travel reservations at what’s likely an ultra competitive price, travel managers are able to enjoy sizable savings from special, immediate payment discounts. And it’s creating an opportunity for the use of alternative corporate payments like virtual credit cards to shine—in the here and right now.

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