There is a consistent theme that cash flow is still one of the most pressing problems that companies face. Organisations in the security industry, like all industries, can benefit from improved cash flow, writes John Vasili, Director of Business Development, at Invapay, a UK-based payment company.
Squeezing every ounce of performance out of your organisation is critical to success. There are no silver bullets that will completely revolutionise your company. Improvements should be small incremental benefits and there are many opportunities to make this happen in managing your working capital. “Off balance sheet credit” is a way to extend available credit and optimise working capital without having the hassle and expense of haggling with your main banking provider.
The card schemes (Visa, American Express, MasterCard and others) provide innovative B2B alternatives. The issuers of these products offer credit facilities on what they call a “fifteen or sixteen digit account” with lots of flexibility packed in. For those familiar with their propositions they will know it provides an easy way to extend credit terms. Essentially, the account enables the purchaser to extend terms by up to 28 days. How? The examples below illustrate the benefits.
Paying suppliers earlyPaying suppliers to 30 day terms
Invoice ApprovalDay 1 – 15 or 16 digit account is chargedDay 1
Supplier PaymentEarly Settlement
Day 3 – Supplier paid.
Pay to terms
Day 27 – 15 or 16 digit account is charged.
Day 30 Supplier is paid.
Corporate Receives StatementDay 30Day 60
Corporate Settles StatementDay 58Day 88
It’s an ideal way to extend credit whilst ensuring suppliers are happy. And there are other benefits, too. Do you get reward points on your credit card? Those with a retail loyalty card will know you can get discounts off your shopping or entertainment. There’s a similar kind of option in B2B payments. The providers of the accounts can offer financial rebates on your spend which goes straight to the bottom line of your business with no extra effort. And there’s more. The transactions are extremely rich in data. This data can be passed directly into your systems which removes the manual effort required in reconciling month end, expenses and VAT returns.
Sound good so far? The next question you might have is ‘what’s the catch?’ The barrier to this type of transaction has, historically, been the ability of the supplier to accept the payment. If your supplier can’t accept the card payment then all bets are off and they can’t be paid. Cloud-based payment systems can be up and running in 24 hours. There is increasing connectivity which allows files to pass between the organisation’s IT systems. The benefits for both buyer and supplier can be reaped within days and not months. It’s quick, easy and won’t require large business cases to secure the investment.
We’ve worked hard to listen to the problems companies face and we believe it is good to think of practical deliverable solutions. If you are looking for ways to improve your working capital this is a low cost and risk free alternative. Visit www.Invapay.com.
