Historically, simply paying suppliers may have been the ultimate goal of AP departments and if they did that, they were considered successful. But times have changed and a highly effective payment process has become much more strategic and has working capital implications. Learn more about creating a highly effective payments program. 

Steps to a Highly Effective Payment Process

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An efficient accounts payables department is one that promptly pays their suppliers on time, with the type of payment they prefer…right?

Wrong! Historically, simply paying suppliers may have been the ultimate goal of AP departments and if they did that, they were considered successful. But times have changed and a highly effective payment process has become much more strategic and has working capital implications.

PayStream Advisors and MasterCard explore what they deem the Perfect Payment Index (TM) and how to achieve that status in their whitepaper, “Perfecting Payment Practices Through Spend Segmentation”. A perfect payment is defined as, “one that is paid on time, uses the lowest cost payment method, and achieves the highest incentive discount.”

PayStream suggests that these defined Perfect Payers partake in an exercise called spend segmentation assessment, which is based on the quality of the supplier relationship, the volume of payments and the value of purchases. The following model has been developed by Perfect Payers –

  • Offer multiple settlement options
  • Determine the best terms for each supplier category
  • Capture increased financial incentive and early payment discounts
  • Leverage virtual accounts through a financial institution that supports virtual accounts

Optimizing your payment program doesn’t happen overnight, but it is something to strive for in the upcoming year. To learn more about segmentation, virtual credit cards and other integrated payables solutions, download the full whitepaper.

 

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