How Enterprises Can Improve the Bottom Line with Balancing Payment Efficiencies and Working Capital

July 18, 2014 Accounts Payable Adam


As many of us in Accounts Payable (AP) have experienced, enterprises that streamline payment processes with ePayments are able to spend more time on adding value to the actual business. We are better equipped to improve the bottom line by eliminating paperwork and chasing down approvals, accelerating the payment cycle, and reducing risks and redundancies. Coupled with dynamic discounting, these enterprises can find new profit sources in AP.  

When we participated in PayStream Advisors’ Q2 2014 report, AP & Working Capital: Increasing Revenues from Early Payments we found that electronic payments are not only critical to dynamic discounting, but also, have a number of other benefits to the business.

The report found that AP departments achieved the following key benefits by using electronic payments:

  • Lower processing costs – 80%

  • Reduction in P2P cycle times – 49%

  • Reduction in fraudulent and lost checks – 20%

  • Increased Vendor Satisfaction – 30%

  • Increased on-time payments – 45%

  • Increased ability to capture early payment discounts – 29%

  • Reduction in duplicate payments – 25%

However, when an enterprise decides to deploy an electronic payments system and incorporate dynamic discounting, they need to look beyond solution providers and create a strategy, like the Perfect Payment Index.  

You’re probably wondering – what is the Perfect Payment Index and how do we get there? Simply put, the Perfect Payment Index creates balance between payment efficiency and the working capital needs of buyers and suppliers.  

[ % on time * % paid electronically * % of discount potential captured]

For both the buyer and supplier, a “perfect payment” is made on time or early, uses the cheapest payment method possible, and achieves the highest possible discount.  When creating the perfect payment strategy, enterprises need to consider the following:

  • Offer suppliers a range of options. Offering yes or no options likely will not get you anywhere with most suppliers.

  • Discover the middle ground of your organization’s needs while also considering what’s most ideal, and what’s most likely.

  • Continually educate your suppliers on the benefits of being paid early on approved invoices.

  • Incentivize your suppliers with tiered payment timelines, and offer faster payments for methods that benefit your organization and longer payments for manual and paper-based methods.

With today’s user-friendly solutions, savvy AP and finance professionals need to be aware of new technologies that enable them to build and operationalize perfect payment strategies.  

The PayStream whitepaper is available for free.  Download your copy here.



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