Many businesses spend considerable time with treasury and finance organizations thinking about cash flow. Cash management can be crucial to ensuring solid balance sheets and liquidity, with improvements opening up investment opportunities without necessarily needing to take on additional debt. Certainly, managing accounts receivables is one area where cash flow can be improved.
But it is also important to consider ways to improve payment cycles on the vendor payables side, especially when it comes to paying telecom and IT vendors.
Proper account payment automation and policy adherence improve cash on hand, while also increasing efficiency and reducing labor costs in the process. Some areas that can help optimize cash flow on vendor payables include:
• Improving spend and vendor/account policy visibility
• Instilling practices to enforce compliance to contractual payment terms
• Reducing duplicate and overpayments
• Modeling the effective payment processes by type to maximize cash management while ensuring on time payments
A Payment Solution to the Rescue
A payment solution should target improving cash on hand from 5 to 15 days and follow a “Just in Time” methodology for payments. Following this process drives the exact date when payments need to be made.
Invoices are batched according to net payment terms or invoice due date, based on the vendor and contract arrangement and based on the prioritized method of payment accepted by a specific vendor for a specific account.
This logic should be fully automated and systematically drive the process of generating funding requests for multiple invoices—known as batches—at the exact time needed, to enable a client to maintain cash balances for longer intervals without the risk of late payment or service interruption from extending too far.
With this process, a payment solution enables cash flow optimization, allowing you to keep cash on the books longer, prevent payment charges, and eliminate disconnect notices and service interruptions.