Martin Seward, vice-president and general manager of global commercial services at American Express, weighs in on how improving payment processes can unlock valuable business insights
As the world emerges from the pandemic, many businesses are starting to feel more confident.
But they must still contend with redrawn expectations around the workplace and changed consumer habits, forcing many to reassess their growth opportunities. Well-publicised issues around rising costs and supply chain problems also continue to create headaches, signalling no end in sight for the disruption and uncertainty that finance teams have had to tackle.
However, there is still the opportunity for growth for those who can grasp it. And the finance functions who best respond to these challenges are the ones that can remain flexible and drive new innovations to help adapt to an increasingly unpredictable world.
Chief finance officers and their teams need more time to focus on the areas that matter, and to continue driving efficiencies and innovation in the finance function.
Reassessing and upgrading payments functions can help, mitigating some of the problems created by ongoing volatility. Whether it’s spending on fuel, advertising or spare parts, improving B2B payment processes can help free finance functions up from administrative work, create more certainty and improve working capital.
There are several important areas where this can make a positive difference.
B2B payments are back on the rise. Recent data from American Express found that, after a very challenging period for UK businesses, business spending rose across nearly all categories in 2021, reflecting renewed optimism.
But this is still an area where businesses carry inefficiencies and have not yet fully digitised their operation. The same research found that around 40% of UK businesses planned to start or further automate both making payments to suppliers and receiving payments from customers in the following 12 months.
This suggests that while they see the clear benefits of doing this, there is still some way to go to unlock the full value that can be gained from these changes. This unnecessary administrative work could be holding back finance teams.
Secondly, one of the biggest areas of continued uncertainty is around the complexity of global supply chains. Geopolitical disruption, severe weather, the Covid-19 pandemic and labour shortages have all contributed to unplanned rises in costs and unexpected problems with supply.
As a result, many businesses have thought differently about supply chain management – from how they select suppliers to how and what they pay in order to consolidate operations and keep cash flow healthy.
To support this effort, finance teams should continue to build relationships with businesses across their full supply chain, mapping this network of companies and identifying opportunities to reduce risk. Scrutinising payment terms will also highlight the areas that most impact on cash flow, thereby identifying vulnerabilities or unnecessary exposure.
Many buyers are understandably looking for suppliers with more flexible payment terms to foster greater subsequent agility in their business. But they must invest in these relationships to strengthen supply chains. Prompt, efficient and easy B2B payments are vital to keeping suppliers on amicable terms.
Finally, one of the key new roles of the finance function is to help the business make smarter decisions. But it can’t be across the whole business all the time.
Digitised payments don’t just offer more certainty and security, they also generate valuable strategic insights. The data harvested can be used to build greater visibility around business spend and help inform better decision making in the finance function and beyond.
An effective and high-performing finance function can create the framework for the wider business to make better decisions. A deeper understanding of both the external environment and the organisation’s resources, which in turn generate timely and relevant insights, will deliver greater value creation over time.
While the finance function has always played a key role in supporting better decision making and business growth, we are operating in extraordinary times. Those finance teams that grasp the imperative to innovate and improve business processes will be best placed to drive success.
For more information, visit americanexpress.com/uk/working-capital
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