Patrick Bermingham said it is surprising how many big organisations still rely on traditional paper invoicing and BACS to pay their suppliers.
While this approach has some advantages, the stretching of standard payment terms – particularly in embattled sectors like construction – is causing suppliers considerable pain.
He said that the high volume of human and capital resources required to set up and maintain admin-heavy supply chain finance processes means buyers often struggle to onboard new suppliers.
“This ‘process overhead’ can be so cumbersome that many buyers become resistant to change, opting instead to limit their supplier choices to a small number of partners, meaning they end up doing business with only a tiny fraction of the overall market”, Bermingham said.
Digital payments integration and the popularisation of B2B card payments in the supply chain is enabling dramatic change. Here, buyers, acquirers, and suppliers can all plug into independent stakeholder-agnostic payments platforms that offer simplicity and efficiency as fundamentals, by doing the invoicing, payment and reconciliation ‘heavy lifting’ on their behalf.
Card payments enable large parts of the payments process to be automated and streamlined, reducing administrative headaches for procurement teams and suppliers alike. For example, Level 3 purchasing cards use bespoke electronic card management information systems. These systems receive invoices electronically, cost-allocate and then reconcile them, all without human input. This creates significant process efficiencies by freeing up internal resources at either end.
Best of breed B2B payment processing platforms also provide detailed email remittances and portals accessible to buyers and suppliers 24/7. These portals include information about past and incoming payments and calculators that allow stakeholders to input their data to show the cost of payments and savings offered – removing any uncertainty and complexity from the equation, he said.
Suppliers that are connected to a well-populated platform can position themselves favourably to buyers. What was once merely transactional has now become a tool to enable the harmonisation of commercial engagement, which is, in turn, allowing stronger, deeper partnerships.
Payments integration is playing an increasingly influential role in supplier selection, evidenced by the sharp rise in tender documents that enquire about supplier acceptance of card payments, and even whether they accept Level 3 purchasing cards. Suppliers who can answer in the affirmative can position themselves more favourably in tenders with any buying client operating a card programme.
Joining an established business network is also beneficial for suppliers – it opens them up to other buyers and issuers in the system. Plus, as a card acceptor, they automatically become part of the network of the card scheme they partner with – Visa or Mastercard, for example. Since the card schemes publish lists of accepting suppliers, buyers use these to identify suppliers on the same network as them – increasing merchant visibility amongst their target customers and driving business growth.