Resources | Working Capital | 16 February 2023

Early Payment Programmes Are a Win-Win for Buyers and Suppliers

Early payment programmes can optimise working capital and strengthen buyer relationships. Here’s why they are a win-win for both buyers and suppliers.

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Early payment programmes can optimise working capital and strengthen buyer relationships. Here’s why they are a win-win for both buyers and suppliers.

In the current economic climate, it is important for businesses to explore innovative ways to improve cash flow and optimise working capital, without compromising buyer relationships. There are many different strategies you can employ to maintain a healthy cash flow, increase liquidity and strengthen supply chain relations. However, participating in an early payment programme is among the most affordable. Better yet, it’s effective for both you and your buyers.

In this post, we’ll explain how early payment programmes can help you free up working capital, strengthen your relationships with buyers and give you more control over how and when you are paid. Furthermore, we’ll answer some of the most common questions you might have about using early payment programmes to accelerate your invoice payments.

What is C2FO’s Early Payment platform?

Early payment programmes, which enable you to give your buyers discounts in exchange for paying invoices early, are a quick and easy way to improve cash flow without taking on new debt. On top of that, they are more cost-effective than other working capital financing options — such as loans, lines of credit or invoice factoring. Even if you have a decent cash reserve and sales are high, late invoice payments can hold up your cash conversion cycle and affect your ability to cover operating costs and invest in growth opportunities.

Why should suppliers use C2FO?

C2FO’s industry-leading Early Payment platform offers significant benefits to suppliers. It can help you accelerate payments, control outstanding invoices, shorten accounts receivable payment cycles, boost cash flow and optimise working capital. The platform makes it easier for you to manage early payment discounts that meet your needs and the needs of your buyers.

Using C2FO’s platform, your buyers can offer early payment in exchange for a discount, while empowering you to choose a discount rate and an optimal payment time based on your cash flow needs. Further, C2FO’s dynamic discounting approach lets you intuitively adjust the timeline of outstanding receivables, on demand. Unlike static discounting, dynamic discounting allows your buyers to pay the invoice any time before the agreed term and get a discount that adjusts automatically based on the payment date.

How is C2FO’s Early Payment platform different from invoice factoring?

Invoice factoring is a type of financing that involves selling your outstanding invoices to a third party (factoring company) in exchange for cash upfront. Factors typically charge a flat-rate fee to factor an invoice as well as additional fees for the period between when you sell the invoice and when it is fully paid.

Unlike invoice factoring, when you use C2FO’s Early Payment platform, there is no flat-rate advance fee for early payment. Rather than receiving an advance in funds and waiting for the remainder of the invoice payment, you can have your buyer pay the invoice early, which can provide an immediate boost to your cash flow.

Why do buyers work with C2FO to manage early payment?

Outwardly, it might seem counterintuitive for your buyers to pay invoices early. After all, the common advice to buyers is to increase terms and lengthen days payable outstanding so they can retain cash on hand longer to maximize their own cash flow. However, settling invoices earlier offers several advantages. For example, buyer benefits include:

Saving money

Buyers can save money by taking advantage of the discount you offer for early payment, which lowers the cost of goods sold and improves their margins. This offers them savings that can be invested for a greater return on investment.

Strengthening the supply chain

Sustaining a healthy cash flow can be a significant challenge for small and mid-sized suppliers, but it is critical for maintaining operations and growth. If suppliers do not have the funds to order inventory, it can lead to delays or disruptions in the supply chain — which buyers want to avoid. By supporting your business in this way, buyers are gaining a more reliable supply chain.

Building or improving their credit score

Paying invoices early can also be a way for buyers to build or improve their credit scores. This is because credit bureaus often consider supplier payment history in their assessment.

Incentivizing desired behaviours

Some buyers have a corporate mandate to improve environmental, social and governance (ESG) practices or support diversity, equity and inclusion (DEI) initiatives. They might offer early invoice payment as a reward if you also support these types of initiatives, such as by adopting ESG best practices. Additionally, buyers might leverage early payment programmes to support your diverse- or women-owned business with better access to capital.

Improve supplier relationships

Paying your invoices early can also be a way for a buyer to build a better relationship with your business. Positive working relationships can create opportunities for future collaboration and the potential for better service or more favourable terms.

What’s in it for C2FO?

C2FO is the technology and support provider behind your buyers’ early payment programmes. Our platform provides a secure portal that enables buyers to upload their invoices and set options for early payment. You can view these invoices and offer a sliding-scale discount to buyers that agree to pay early.

In summary

C2FO’s Early Payment programme is a win-win solution for you and your buyers that does not impact your existing terms and conditions. It helps you optimise your cash flow without taking on debt so you can cover your costs today or invest in future growth. Ultimately, C2FO’s innovative working capital solutions help companies like yours gain greater control over cash flow by offering flexible and on-demand access to working capital when you need it.

Are you interested in leveraging C2FO’s working capital solutions to accelerate cash flow for your business? Get started by searching for your buyers today.

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