AP Automation

3 ways to secure early payments

June 25, 2021
Tradeshift Editorial Team



Securing early payments

The disruptions of COVID-19 are far-reaching, and it will be quite some time until we understand the full extent of its impact. One thing, however, is quite clear — businesses need to implement new digital technologies and processes that support a more resilient supply chain, and that help you to get paid faster.

In the past year, 49% of businesses have accelerated spending in digital technologies due to the transformation to a virtual global trade format. These companies have expressed a need for a more transparent cycle so that business operations can run smoothly. After all, a more streamlined and reliable cash flow means your organization has the resources and funding needed to develop and grow with the times.


Embrace digital tools and automation

One of the biggest barriers that supply chain professionals face is a lack of digital tools and support. As organizations start to see signs of growth and their levels of orders increase, managing the supply chain cycle for each buyer and seller can become time-consuming and overwhelming. That’s where digital tools come into play. With automation and AI capabilities, organizations can automate their most tedious and time-consuming tasks, giving them more time to focus on their business relationships.

The right digital platform enables automation for the entire invoice process. With ap automation, you can digitize your accounts payable processes creating a more simplified experience that gets you paid faster. Tradeshift Pay’s ap automation solution grows alongside your needs, learning how you want to code and approve invoices. This means that you can dial up or down your desired amount of AI-powered action, giving you an AP process that grows closer to exception-free accounts payable each day.


Implement an early payment solution

When it comes to early payment solutions, three strategies are commonly utilized:

Supply chain financesupply chain financing (SCF) utilizes third-party financers to help an organization manage its operations and working capital. When organizations implement an SCF strategy into their payment solutions, they hand off the risk and mitigation to a financier, creating a more liquid business function. With this scenario, the buyer’s credit rating determines the cost of accessing capital (cash). When buyers have a high credit rating, they can more easily and affordably access funding from a financier. This results in a short-term credit solution with lower risk than traditional payment strategies for both the buyer and the seller.

Dynamic discounting — organizations who find themselves with excess cash would benefit from implementing a dynamic discounting strategy. The fundamentals of dynamic discounting are simple — the sooner you get paid, the higher the discounted rate is for your buyer.  On the surface, dynamic discounting looks pretty similar to SCF, but the differences lie in where the funding originates. With SCF, the funding is granted by a third party. In dynamic discounting, the buyer grants the funding for an early payment program with their own cash. Buyers appreciate dynamic discounting strategies due to their low levels of risk and high value that is generated from additional sources of income.  Suppliers find their value in an improved business relationship and easier option for financing than other early payment solutions.

Accounts receivable factoring — is one of the oldest types of financing. Accounts receivable factoring (ARF) involves selling accounts receivables, or outstanding invoices, at a reduced price to a factoring or financing company. This means that your organization receives cash faster (at a reduced rate than what you’d receive through your usual payment terms) while reducing the risk you incur of defaulted or late payments. Many organizations utilize ARF to get paid for products or services immediately rather than waiting for the completed payment term. While this option gives you faster access to cash, which enables higher levels of growth, the drawback of ARF is that the payment you receive will be lower than if you followed the terms of your initial payment plans.


Take advantage of B2B marketplace and vendor networks.

Sometimes, it pays to expand your supplier and vendor networks. Unfortunately, not all of your vendor relationships will take the prize for reliability and efficiency when it comes down to it. Now, and then you might find yourself stuck with a vendor that consistently misses deadlines or is more hassle than they’re worth. With access to a marketplace and network of pre-vetted vendors and suppliers, like the Tradeshift network, supply chain professionals can quickly and easily find new business partners to replace their less than stellar ones.

What’s more, is that Tradeshift’s network comes equipped with features to support earlier payment cycles. Unlike traditional payment solutions that are based on seller credit history, Tradeshift Cash takes the history of invoices in your network, creating a payment process that gets more of your sellers paid early and predictably. This reliability means you can have greater access to cash flow, giving you a supply chain built to withstand disruptions. Tradeshift Cash can work alongside your existing payment solutions or can replace them entirely. Built to adapt alongside your company and sellers, Tradeshift Cash is a solution that works for all.

When it comes to supply chain management and securing payment, digital tools are necessary for success. In an ever-changing and ever-connected world, supply chain professionals need the reliability and support that a digital supply chain platform provides. With the support of Tradeshift Cash, businesses can rely on getting paid earlier every time, not just sometimes. Our best-in-class software solutions create value for sellers, enable faster onboarding, and help you to build a more durable supply chain.

For more information about how we can help you digitize your supply chain, reach out to our team of experts and make shift happen today


About the Author

Tradeshift connects buyers, suppliers, and all their processes in one global network. We help you transform the way you work with suppliers today – and adapt to whatever the future brings.

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