B2B Debt Resolution, Banking and Cash Flow

Businesses today grapple with an increasingly complex operating environment. Changing business models, disruptive technologies, changing regulations coupled with an inflationary environment, rising interest rates and tight credit are compressing operating margins. And cash flow and liquidity discussions are growing in importance.

In this volatile environment, a sharp focus on treasury excellence, within ongoing operations, is fundamental to helping companies achieve growth and be more resilient. Positive cash, among other factors, requires businesses to have real-time visibility and control over debt.

A major concern is that many small and large businesses rely on error-prone spreadsheets and semi-automated or manual processes or complex applications with limited expert users to manage business expenses. Not only is this approach extremely time consuming, but it also limits agility. The distributed nature of spending by employees at all levels across multiple lines of business, vendors, and categories increases management complexity. At the enterprise level, the inability to link disparate expenses into a single, unified view complicates the governance, management and planning of debt and the optimal use of available working capital.

As a result, many companies often fall back on short-term tactical mechanisms to generate free cash flow, which can potentially overlap with invisible costs that go unaccounted for. Businesses, for example, can increase days past due to better manage expenses and cash flow. This approach can lead to missed prepayment discounts, surcharges and interest or delivery delays and quality issues that affect supplier relationships as well as the ability to negotiate flexible payment terms in the future. . This further hinders cash flow. According to the “Next-Gen Digital Payments Report”, from PYMNTS and Transmap, 73% of procurement professionals said late payments hurt business relationships. More than 59% also said their suppliers had reduced or stopped offering discounts altogether due to overdue invoices.

Another frequently adopted measure—equal, company-wide budget cuts—to control spending sounds simple but may not result in lasting transformation of organizational cost structures in the long run. Such across-the-board cuts can also result in lost opportunities to unlock value due to an inability to identify and eliminate replicated spend across different layers or lines of business. As a corollary, many companies centralize spending decisions, reducing employee privileges related to discretionary spending. This creates friction between finance teams and lines of business and hinders innovation and productivity.

It is increasingly important to have real-time, bottom-up debt transparency to ensure that decision makers have the information they need to better manage cash flow. By implementing digitally-enabled accounts payable and payment automation processes, businesses can improve control and visibility over cash flow.

Optimize cash management

An intelligent payment platform automates the entire payment lifecycle from vendor onboarding, automated invoice receipt, routing, approval, three-way reconciliation, and pre-credit card payment execution. -integrated as an option. A centralized platform avoids communication delays between relevant departments, improves process efficiency and reduces processing costs. Research by Zaggle indicates that the average organization processes 2,000 invoices per year, and processing costs can range from $6 to $8. Digitizing debts can reduce these costs by 90%.

With a centralized platform for company-wide expenses, businesses can determine precisely when and how to pay suppliers to ensure maximum control over outgoing cash flow and available working capital trapped on balance sheets . For example, companies can post payables to a single vendor across all aggregated individual employee cardholder accounts and renegotiate contracts for overpayments. Similarly, payment cycles can be optimized based on cash inflows and future working capital needs can be predicted by looking at historical spending patterns across lines of business and geographies. Organizations can also strengthen budget compliance by tracking budget spending or channeling payments through the most cost-effective payment methods. Debts incurred outside normal operating regions or currencies can be identified to better plan for future budget cycles.

Integrate instant credit into payable workflows

An important aspect of managing accounts payable is the ability to make decisions related to financing business expenses. Best-run businesses need working capital loans to fund temporary and seasonal cash flow variances. At the same time, as many companies have experienced recently, the big banks are tightening their credit facilities and may act cautiously for companies in the mid-size segment. According to a 2021 report by the Association of Chartered Chartered Accountants (ACCA), India’s MSME sector faces a credit gap of US$240 billion.

Combining accounts payable with a credit card capability allows companies to manage and fund supplier payments. Corporate credit cards easily integrate into the payment system to provide simple card management that allows program and individual account managers to set spending limits. For example, companies like Zaggle offer midsize businesses facing cash shortages an instant line of credit to meet payment obligations, take advantage of prompt payment discounts, and avoid late payment fees. Additionally, businesses with large invoice volumes using credit cards as a payment instrument can earn cashbacks and rebates allowing them to reduce overall invoice processing costs. As rebates increase with activity, businesses have more investment capital as business operations expand. As a business generates more revenue for a bank by frequently using a business credit card, the bank may increase its profit credit rate to help lower overall bank fees.

Multi-rail payment capabilities for enhanced controls

Multi-payment rails integrated into Accounts Payable workflows, providing better cash flow and liquidity control. For example, businesses can benefit from a higher volume of prepayment discounts when interest rates are low or use real-time payment rails (unified payment interface) to make just-in-time payments when interest rates are low. interest rates are high. Additionally, digital payments improve auditability and reduce reconciliation overhead.

Institutionalize the culture of budgetary discipline

Sustainably improving working capital performance requires a cash-conscious mindset across the organization. Significantly, the ability to track and control enterprise-wide spending against budgets helps leaders focus on strengthening cash culture across organizations and implementing No-regrets measures to empower employees to decide on spending. Accounts Payable automation software supports advanced management workflows for purchase order and invoice approvals. Businesses can define clear accountabilities and assign spending decision rights to front-line employees with an effective oversight and monitoring structure all the way up to the CFO for high-value spending with significant cash flow implications.

Improve business relationships with suppliers

The ability to view supplier positions at the individual supplier level brings increased transparency to the negotiation and invoicing process and improves supply chain efficiency. Businesses can foster cross-business collaboration where friction once reigned and negotiate better contract terms while suppliers gain greater visibility, eliminating anxiety through improved payment predictability.

Accounts Payable plays a vital role in day-to-day financial management. By digitizing accounts payable, fast-growing businesses can streamline costs and speed up invoice processing cycles and better leverage working capital, thereby streamlining overall cash flow.

(The author is Mr. Avinash Godkhindi, MD and CEO of Zaggle and the opinions expressed in this article are his own)

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