The COVID-19 pandemic put the spotlight on payments, highlighting the need for agility and leading many treasury teams to accelerate plans to overhaul their payment strategies in a bid to achieve greater control and transparency.
Increasingly, Commercial Cards are playing a key role in these revamped payment strategies, with more and more businesses keen to unlock the extra value using cards for higher-value transactions and B2B payments can bring.
Working capital benefits – Commercial Cards typically offer access to a period of interest-free credit, making it easier to manage your liabilities in a convenient and cost-effective way.
Time efficiencies – automating payments off the back of your existing accounts payable process can lead to useful time savings.
Simplifying ad-hoc payments – removing the need for time-consuming supplier set-up processes for one-off and irregular payments.
Extra protection – if there’s an issue with receiving your goods, for example, the supplier goes into administration or doesn’t deliver as agreed, the chargeback protection Commercial Cards offer means you shouldn’t be left out of pocket.
Greater control – you have full visibility of spend and can ensure it is in line with current policy. This also helps minimise fraud and misuse.
Supply chain security – reducing the days payable outstanding for your suppliers without impacting your own cash flow.
Prompt payment – Commercial Cards can facilitate payment to suppliers on a specific date selected by the buyer, ensuring buyers meet their Prompt Payment Code obligations.
Easier reconciliation – card transactions have a wealth of data associated with them, simplifying the reconciliation process or even allowing it to be fully automated.
While Commercial Cards have the potential to bring significant added value to businesses, there are a number of challenges that can prove a barrier to adoption, such as:
Process change – rolling out new processes can seem daunting and time-consuming for both buyers and suppliers.
Loss of control – some buyers are concerned around losing control of when payments are taken and the effects it might have on their own working capital position and ability to meet Prompt Payment Code obligations.
Supplier acceptance – suppliers who don’t have retail or customer relationships can be reluctant to accept card payments due to the initial cost of setting up card acceptance and/or the ongoing costs associated with card transactions.
Transaction size – Commercial Cards are often viewed as having a ‘ceiling’.
Businesses have been coming up against many of these challenges for years, but the landscape is rapidly changing as issuers take steps to adapt to businesses’ evolving payment needs.
We’re taking proactive steps to redesign our payment solutions, so they offer a greater opportunity for our buying customers to utilise card payments as a part of their transaction mix, and reap the rewards of doing so.
In recent months we’ve rolled out a number of solutions aimed at making Commercial Cards more accessible, from both the buyer and supplier perspective, including partnering with VISA on straight-through-processing (STP) technology and additionally Virtual Card Solutions.
STP turns the traditional supplier-initiated payments model on its head by enabling buyers to settle invoices direct to their supplier’s merchant account and then settle all payments with one monthly direct debit. It reduces the need for time-consuming or costly processes on your suppliers’ side, helping to remove the barriers to them accepting payments.
The key benefits of STP, for both buyers and suppliers, include:
Protecting working capital – STP takes the working capital benefits afforded by using Commercial Cards a step further. Buyers can schedule their payments to maximise the number of days before their statement, giving them more flexibility with their cash flow than would be the case with a bank transfer. From a supplier perspective, they can receive settlement earlier, offering them greater control of their own cash flow.
Simplified reconciliation – STP provides more control and insight over transactions. Buyers can track each payment by its unique virtual card number to make the reconciliation process easier and less time-consuming. Suppliers receive payment details via email, allowing them to track and reconcile invoices easily.
Plus, there’s no need for any time-consuming process change or investment in additional technology – the back office in accounts payable can use the same processes for Commercial Card payments as they do for BACS and CHAPS.
While our STP solution is already helping many businesses unlock the benefits of Commercial Cards, it’s just the start.
We're committed to a road map of change, which aims to address our customers’ pain points, overcome the barriers to B2B Commercial Card use and create a smoother transaction landscape for both buyers and suppliers over the coming months and years.
The next step on the journey is the launch of our upcoming eOptimise solution, which will address challenges around process change, transaction size and supplier acceptance while also offering both suppliers and buyers greater levels of control.
The scale and nature of businesses’ B2B payment challenges varies hugely, and different businesses can require very different solutions. We’re keen to hear about your individual needs – whether you’re navigating a complex payment landscape or want to implement a simple B2B payment system. We can help identify the right solution and ensure you make the most of Commercial Cards.
To see how we can support your payment needs, visit lloydsbank.com/cardsolutions or email us at lbgcommercialcards@lloydsbanking.com.
James Sykes is Head of Commercial Cards, and David Legg is Head of Corporate Card Products at Lloyds Bank
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