-

How can treasurers free up working capital?

How can treasurers free up working capital?

Anna Porra

Innovative, card-based solutions have the potential to unlock greater flexibility in corporate treasury.

We talk to Anna Porra, Commercial Strategy Director for Barclaycard about how treasurers can benefit from driving a change while adding value to their businesses.

Transforming the role of treasury

Treasurers tread a fine line for their organisations. As the people responsible for realising working capital benefits, their role is a constant balancing act of locking in cash versus releasing it back into the organisation to meet business goals, such as growth, debt reduction or investment.

Innovative payment technologies are well-placed to assist, and treasury is beginning to acknowledge their relevance as solutions. “Treasurers are increasingly involved in the selection of their corporate card providers,” Anna says. It’s a change from a few years back when decisions on corporate cards were in the hands of procurement and finance only.

“A card-based solution is a tool …to impact working capital.”

Driving their interest is the recognition that many core treasury needs – flexibility to manage short-term and long-term capital allocation, greater visibility into the cash position and high-speed operational efficiencies – can be served by virtual card technology, such as Precisionpay. “Treasurers are being alerted to the fact that a card-based solution is another tool they can use to manage cash flows and therefore impact working capital,” says Anna.

One of Precisionpay’s latest evolutions plays out against this backdrop. Payments were previously only possible along card rails. “We have now also enabled payment to be transmitted on traditional BACS rails directly into a customer account,” says Anna. As a result, the Merchant Service Charges suppliers needed to pay to accept payments on card rails no longer apply.

Anna Porra

Building flexibility into treasury

An immediate benefit is payment flexibility. Businesses could, for instance, negotiate an early payments discount or flex the payments cycle to create additional working capital, while still ensuring suppliers are paid on time.

Anna explains “Let’s say a business has 30 days to pay. By introducing a card-based solution, they can still pay on time, but the treasurer can extend the corporation’s terms by up to 86 days because of the payment cycle back to the card provider. They now have additional days to use the additional working capital.” Or an opportunity to build stronger supplier relationships through better dialogue or by paying more strategically.

Increasing control and visibility

Insight and control are other factors. “Controls can be embedded within the payments features and applied on the value of spend on certain items, or where those items can be spent,” says Anna. “Through the data our solutions provide, treasurers get real insight as to what money’s been spent and when it is coming in and out of the organisation. This gives them the control, visibility and transparency they need.”

“The data insights give …control, visibility and transparency.”

Businesses adopting a card solution for working capital opportunities typically have either cash targets or growth and investment targets. For mid-sized organisations in a growth phase, access to cash and the ability to pay via bank transfer have particular appeal. Adoption has been highest among these companies, not least because it allows them to enjoy the benefits of a credit card account when working with suppliers – such as those who are new or at the tail end – and don’t accept credit cards.

Treasury adds value to the business

Access to working capital is a key driver of treasury and, as card solutions change the dynamics of the payment landscape for businesses, Anna expects treasurers to continue to grow their influence. As well as becoming core to business decision-making, they will have greater involvement in leveraging technology solutions.

“Treasurers …will leverage solutions to drive change and value.”

Take accounts payable as an example. Treasury’s ability to optimise credit terms for cash flow can turn this from a cost centre into a profit-making or revenue-generating department. “I think that will become more evident,” says Anna, “and you’ll see treasurers being alerted to that and leveraging these solutions to help drive change and value in their operation.”

Create value from your everyday business payments

At Barclaycard, our payment experts work with you to unlock the smartest payment strategy for your business. To find out how much money your finance department could generate to your bottom line, fill out our simple form and a member of the team will be in touch. Or, you can give us a call on 0800 151 2586, Monday-Friday, 9am-5pm.

Ideas and insights for your 'eureka' moment

We bring you all the latest industry insights in business to business payments. Whether you're in finance, treasury or procurement, we can help you take a moment to consider if your payments strategy is the right one for your business