Commercial Insights

How paying with a commercial card can benefit businesses and suppliers

Working to increase commercial card acceptance with vendors can lead to improved working capital management – for both businesses and suppliers.

While a business may have multiple payment options at its disposal when paying suppliers, paying with a commercial card can offer significant strategic advantages. A commercial card program can be mutually beneficial for both businesses and their suppliers – which can lead to stronger relationships.

“Having healthy supplier relationships is fundamental to business performance, and leveraging a commercial card can be an important tool in helping solidify them,” said Jay Darnell, Regions Head of Commercial Card and Fintech Enablement. “Successfully negotiating terms for suppliers to accept commercial card payments can lead to operational advantages for both sides.”

Four best practices to increase commercial card acceptance with suppliers

1. Focus on supplier relationships

It begins with communication. Let suppliers know how accepting card payments can lead to better benefits when it comes to their working capital. These benefits include improved cash flow, simplified receivables and reduced reliance on external financing.

When suppliers understand how card acceptance supports their financial goals, they are more likely to participate. For businesses, building a structured supplier enablement program in order to increase acceptance and adoption is critical for maximizing commercial card program value.

2. Promote the benefits

Highlight the benefits for suppliers to gain buy-in for accepting card payments. These benefits can include:

• Faster settlement – Suppliers can receive funds within 24 to 48 hours, versus 30- or 60-day terms.
• Simplified accounts receivable – Credit card payments eliminate much of the manual work involved in check processing, scanning, and reconciliation.
• Better reporting and analytics – Card-based transaction data can integrate easily into supplier systems.
• Mitigate fraud exposure – Card payments offer stronger security controls as opposed to other forms of payments – including checks, among the most vulnerable payment forms to fraud.

3. Offer mutually beneficial alternatives to offset fee concerns

Some suppliers may hesitate to accept commercial card payments due to processing fees. However, the speed of payment that commercial cards offer can help suppliers improve their working capital. Businesses can also help offset processing fee concerns by proposing shorter payment terms (An example? Pay in 14 days with a card as opposed to 60 days by check) or establishing early-pay or guaranteed-pay arrangements to strengthen the supplier relationship.

4. Virtual cards create greater efficiency and security

Virtual credit card payments provide automated, detailed remittance data directly tied to invoices. In turn, this can lead to more efficient and accurate reconciliation and reporting. At the same time, virtual card transactions also offer stronger fraud mitigation than checks and reduce the risk of credit card information theft.

Considerations to keep in mind

A commercial card program can offer many substantial benefits. However, it’s important to understand program limitations as well, particularly when it comes to supplier acceptance.

Acceptance often depends on the supplier’s payment processor, their willingness to absorb interchange fees and the need for accelerated cash flow. Further, some suppliers may be resistant to processing fees, even when they can be offset by faster settlement due to their effects on working capital strategy or billing practices. In addition, some suppliers may impose surcharges or refuse cards for larger invoices, especially those suppliers in industries with thin margins. Finally, some suppliers may adjust their pricing or stop offering early pay discounts because card settlement has replaced negotiated payment terms.

The takeaway, according to Darnell, is that commercial cards can work harder for both businesses and suppliers. But having a clear understanding of how each party stands to benefit is key.

“When it comes to navigating commercial card acceptance with suppliers and having conversations with your vendors, it helps to have trusted advisors on your side, such as those on the Regions Commercial Card team, who can talk you through the ins and outs and help you understand what’s possible.”

Darnell adds that it is important to view a commercial credit card program as more than a payment solution. “The right program can serve as a catalyst for greater operational efficiency, tighter financial control and stronger supplier relationships. These key improvements can have a transformative effect on company operations.”

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