Resources | Working Capital | February 16, 2023

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

Early payment programs can optimize 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 programs can optimize 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 optimize 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 program 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 programs 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 programs to accelerate your invoice payments.

What is C2FO’s Early Payment platform?

Early payment programs, 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.

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 optimize 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. Generally, factors will advance 70% to 90% of the invoice amount. After the buyer pays the invoice, the factor then pays you the remaining balance minus its fees.

Unlike invoice factoring, when you use C2FO’s Early Payment platform, there is no flat-rate advance fee for early payment.

Both invoice factoring and dynamic discounting provide quicker access to capital. However, with dynamic discounting you:

  • Receive the full amount of your invoices upfront, minus the discount.

  • Retain control of your invoices and the buyer relationship.

  • Pay substantially less in fees.

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 behaviors

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 programs 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 favorable terms.

What’s in it for C2FO?

C2FO is the technology and support provider behind your buyers’ early payment programs. 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.

This service facilitates early payments on behalf of buyers. While there is no cost for suppliers like you to use C2FO’s platform, buyers pay a subscription fee and a small portion of the discount in exchange for the service.

How do I request early payment?

The process to request early payment is simple:

  1. The buyer uploads your invoices to the platform and sets a target for the size of the discount it is seeking in exchange for making an early payment.

  2. You select which invoices you are willing to discount and the size of the discount for early payment.

  3. The buyer pays you the same way it always has.

Will the method of payment change?

C2FO’s platform has no impact on your buyer’s existing payment method. Once your offer is accepted, payment is delivered as usual — but quicker than your agreed terms. Requesting early payment from your buyer will not change your relationship with your buyer in any way. Your existing payment terms and methods will remain the same.

Will C2FO pay me instead of my buyer?

No, C2FO does not provide you with any payment. You will still be paid directly by your buyer. C2FO never collects invoice payments from your buyer; the platform simply facilitates the early payment process.

If the buyer doesn’t accept my discount offer, do I have to take what it will accept?

No. There is absolutely no obligation for you to accept a suggested discount. C2FO’s patented Name Your Rate® technology empowers you to decide the rate you’re willing to offer buyers for early payment. The platform connects discount offers with the desired targets of your buyers, and our real-time price valuation means that you can approve discount rates at different thresholds, on timetables and for invoice sizes whenever you choose.

When can I use the program?

You can use the program whenever you want to. You can log in at any time, see which invoices are available for early payment and submit a discount offer on-demand.

In summary

C2FO’s Early Payment program is a win-win solution for you and your buyers that does not impact your existing terms and conditions. It helps you optimize 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? Learn more or get started by searching for your buyers today.

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