5 ways vendor early payments help your vendors - and your business too
Vendors want to get paid immediately. However, most vendors, probably yours too, have to wait 30 days, 60 days, and sometime longer to get paid.
But what if a 3rd party would offer your vendors options to accelerate their payments whenever they need some extra cash, without using your cash to fund these early payments? In what ways would that benefit them? Would that benefit your company too?
Let’s check out 5 use cases that demonstrate how both your vendors and yourself can benefit from a 3rd party that allows your vendors to collect early on-demand.
Use case I: Overcoming seasonal peaks
Seasonal peaks can put the cash flow of any vendor to the test - whether it’s a small shop or a giant Fortune 1000 vendor. Since these peaks are typically short (a few weeks to a few months), there may be times where your vendors’ credit facilities won’t be enough to completely cover their cash needs. During these times, having options to accelerate payments of individual invoices (while collecting all other invoices at maturity with no extra cost) can be very helpful to your vendors.
What’s in it for you? By helping your vendors overcome short term cash flow challenges, you reduce the chances of experiencing supply shortages or disruptions. These accelerated vendor payments do not consume your cash and cost you, the buyer, nothing!
Use case II: Bridging cash flow gaps
Regardless of seasonal peaks, most vendors experience temporary cash flow gaps from time to time. This is just part of doing business! Having standby options to accelerate payments of your invoices (using 3rd party cash) is an optional financing channel that can complement your vendors’ bank lines and be a valuable addition to your vendors’ cash management toolkit.
What’s in it for you? A liquid vendor is more likely to be a long term partner. Replacing/switching vendors costs you money, time and effort. Reduce supply chain risk and focus on your more productive tasks!
Use case III: Collection convenience
Some vendors do not like dealing with ‘micro payments’ and prefer to accelerate payments of all of the outstanding invoices they have with you, their buyer. Financing all payments and having them paid as a lump sum in a single ACH / wire payment is easy and convenient for them.
What’s in it for you? You avoid making multiple small payments and position your company as a buyer that’s easy to do business with in the eyes of your vendors.
Use case IV: Being able to sell more
Some vendors have a capped credit appetite towards their customers. This is a common practice for instance when the vendor is much larger than the client.
Some of your vendors might even limit their sales towards your company if they exceed that limit. Quartix allows these vendors to sell it any number of their invoices (at any volume). When Quartix accelerates a payment, it buys the invoice from the vendor on a non-recourse basis (a “true sale”). This way, whenever the vendor exceeds its desired credit exposure, it may sell invoices to Quartix to stay below the limit.
What’s in it for you? You’ll be able to buy more from vendors that may have a credit limit towards your company.
Use case V: Just watching!
Some vendors never accelerate any payment but rather enjoy the information transparency. Having the ability to track the approval status of their invoices makes it easier for them to manage and predict their inbound cash flow and detect invoices that were not received or approved by you. Of course, they always have the option to accelerate payment in and when they’d need to do so in the future...
What’s in it for you? If your vendors can check the approval status of your invoices on-line, they won’t need to call you every week. That means lower friction and less work for your procurement and AP teams!
Learn how to increase the financial and operational efficiency of the business relationship between you and your vendors by combining technology and external, 3rd-party funding. Book a time here.
Want to discover how to minimize your payment term extension effort and friction and help you complete the initiative successfully? Learn how in this e-book!