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How commercial card creates value for your business and suppliers

Small businesses are continuing to adopt commercial card programs to drive more value for their business and their suppliers—including optimizing working capital, making faster payments and creating a more efficient accounts payables process.


Small businesses make up more than 35 percent of total B2B commercial card spending in the U.S., which accounts for nearly $500 billion in value.1 These facts demonstrate the growing popularity of commercial cards amongst smaller enterprises—a trend that’s expected to continue as more businesses continue to digitize their payments.

From paying for corporate travel and lodging to settling supplier invoices, commercial cards provide a quick and easy way to make B2B payments. Card programs also help create more value for businesses and their suppliers. From optimizing working capital and making faster payments to creating more efficient accounts payable processes, here are three ways businesses like yours can generate more value.

 

How commercial cards help optimize working capital

One commonly cited advantage of commercial card programs is the ability to optimize working capital by extending the business’ days payable outstanding (DPO), which is the average number of days that a company takes to pay its bills and invoices to the supplier. Like a consumer credit card, the payment acts as a form of short-term lending and helps maximize the available float during the billing cycle. When a business extends its DPO, it’s not at the expense of the supplier and doesn’t impact the business’ DPO ratio.



Your company can also benefit from annual cash rebates… or a chance to earn rewards points that can be redeemed across range of categories, like cash back, travel (e.g., air, hotel, car rental), gift cards or merchandise.


A business can actually use a commercial card to pay their suppliers on shortened terms like, for example, 10 or 15 days. This can help to foster stronger vendor relationships. Meanwhile your company can also benefit from annual cash rebates, depending on your spend volume. Or you might opt for a chance to earn rewards points that can be redeemed across a range of categories like cash back, travel (air, hotel, car rental), gift cards or merchandise

 

How commercial cards help shorten payment cycles for suppliers

Your suppliers may be wary of accepting card payments. However, when a business pays with a commercial card, suppliers can reduce the number of days that it takes to collect payment after the sale has been made, which is known as days sales outstanding (DSO). As well, costs associated with card are virtually non-existent—especially so when you consider the early pay discounts suppliers offer to buyers who pay within, for instance, 10-15 days. These discounts can easily reach 2 percent of the total invoice.2 With commercial cards, suppliers can be paid more immediately and more affordably without asking buyers to shorten their DPO.



With commercial cards, suppliers can be paid more immediately and more affordably without asking buyers to shorten their DPO.


Additionally, card payments are simple and involve less manual processing, which reduces the chance of payment delays or errors and results in a smoother and more reliable collection process. There is also greater security. If a transaction is authorized by a card network, then it can be treated like guaranteed funds. With a checks or automated clearing house (ACH), there can be clawback provisions or other issues that may impact payment or processing.2

 

How commercial cards help enhance reconciliation and accounting processes

Commercial cards offer robust and comprehensive remittance data, which can be useful for both reconciliation and accounting. The data can also be easily integrated into enterprise resource planning (ERP) systems and accounting platforms, which helps improve efficiency and supports greater automation. The remittance information from checks or ACH transactions are usually insufficient for straight-through processing and, therefore, require manual input. This may be a drain on in-house resources and increases the likelihood of making errors.



By centralizing your payments information, it’s easier to analyze spend and discover new efficiencies.


With commercial cards it is also possible to use real-time reporting dashboards, which can provide accurate information on all transactions made through the card program. By centralizing your payments information, it’s easier to analyze spend and discover new efficiencies. For example, a company could identify new spending streams that it could bring onto the card program—which could help maximize the rewards it generates. Or your business could also rationalize unnecessary expenses.

 

Find the right commercial card solution for your business

As you evaluate how a commercial card program can help your business create more value from the way you pay, you don’t need to figure it out all at once or on your own. Connect with us, and we’ll help you find the right commercial card solution for your business.


Learn how to choose the right commercial card program for your business.

Learn more

 


 

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1. “Snapshot: Size and Segments of US Commercial Card Spend,” Payments Journal, May 2020. https://www.paymentsjournal.com/snapshot-size-and-segments-of-us-commercial-card-spend/
2. “How Commercial Cards Can Deliver On The Promise Of Faster Supplier Payments,” PYMNTS.com, December 2019. https://www.pymnts.com/news/b2b-payments/2019/how-virtual-cards-can-live-up-to-their-faster-payments-promise/


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