Enhance Working Capital With Single-Use Accounts

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When a multinational manufacturer with operations in 20 countries wanted to improve working capital management, it sought to extend payment terms with its suppliers. Rather than impose new conditions on its vendors, the company created a Single-Use Accounts program that benefits both parties.

The Challenge
The company, which has annual sales exceeding $7 billion, wanted to increase its Days Payable Outstanding (DPO). Its low DPO and existing payment terms meant that the company was not maximizing its own working capital management. An additional challenge was overcoming the reluctance of its vendors; if it mandated extended payment terms without providing alternatives, key suppliers could be alienated, potentially causing serious cash flow issues.

The Solution: A Single-Use Accounts Program
The company partnered with J.P. Morgan to develop a Single-Use Accounts program that ultimately benefited both the company – and its vendors. A Single-Use Accounts program — an electronic card-based payment solution — is an appealing option for vendors that want to be paid immediately by accepting funds via credit card. This electronic payables tool provides customers with the flexibility, float and rebate of a purchasing card, along with powerful security, anti-fraud and reconciliation features.

How Single Use Accounts Work
Single-Use Accounts can be used with Visa^® or MasterCard^® accepting merchants for each purchase, with availability of funds limited to an approved amount per account. Since all transactions are automatically matched back to the client's purchase documents, such as a purchase order, invoice or receipt, the reconciliation process is simplified. Suppliers can accept extended payment terms, or choose to be paid immediately via Single-Use Accounts.

Realizing the Benefits
After implementing the Single-Use Account program, the manufacturer saw almost immediate benefits, including:

Improved DPO and working capital management. The company estimates that weighted average payment days have increased to more than 10, significantly strengthening working capital.
Enhanced Vendor Retention. Since the inception of Single-Use Accounts, not one supplier has left the program due to dissatisfaction.
Elevated Card Spend. The company estimates that, by implementing the Single-Use Accounts program, its annual card spend increased 190 percent over the course of a year and on a monthly basis, by implementing Single-Use Accounts, overall card volumes increased 350 percent over the course of three years.
Lower Costs, Plus Increased Security. Since many payments had been made by check, the company saves printing and postage fees - and simultaneously reduces the risks associated with lost, stolen or abandoned checks.

Savings You Can Measure
A Single-Use Accounts program is vital to any payment automation or working capital optimization strategy. It can:

Help reduce paper inefficiencies,
Turn cost centers (such as accounts payable) into profit centers,
Improve DPO and
Enhance both payment timing and control.

To learn how your company can benefit from a Single-Use Account program, visit www.jpmorgan.com/visit/single-useaccounts or contact your J.P. Morgan representative.