Since remote work became universal, businesses worldwide have made magnificent leaps in removing checks and other traditional payment processes to adopt electronic payments. In turn, these changes have significantly increased the number of ACH payments.
According to the governing body for the ACH network, business-to-business payments for supply chains, supplier payments, bills, and other transfers increased by almost 11% in 2020. As more and more organizations begin to embrace electronic payment processes, AP must consider another strategic opportunity: electronic credit cards.
Most companies traditionally used credit cards to help employees manage their departmental expenses like supplies, software subscriptions, and more without having to go through a bureaucratic process. However, while the benefits of adjusting to electronic supplier payments are clear and enormous, only a few are taking advantage.
There are many benefits of using credit cards for companies, including setting up financial guardrails on these cards. Business executives can place controls on the employee's spending limits. Some processes even allow post-transaction reviews to allow remediation for inappropriate spending. This brings convenience and safety, which is why many finance departments consider credit cards as a tool for employee productivity.
Given the remote work culture nowadays, businesses have not many options but to embrace the new electronic and technological ways of doing things. That said, the big question is, how can companies build a successful card program in accounts payable?
Businesses will need a supplier interaction and technical component that banking institutions rarely provide in order to make card processes work in their existing AP structures. For instance, banks typically see credit cards as a form of lending, offering credit lines for their customers to spend and repay. Paying suppliers by card allows companies to reach their top 10 or 20 suppliers, which is normally regarded as a successful loan program. However, banks don't usually have enough resources to provide enhanced reconciliation data or allow customers to interact with more suppliers.
This is where fintech companies can shine because their business models are designed to include a supplier engagement process focused on increasing card spend. Making financial transactions with credit cards allows companies to pay more suppliers online, gain more working capital, and have a greater opportunity for rebates.
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