Supplier Integration: A Strategic Pillar for Working Capital Efficiency

There are two sides to any commercial transaction. Within B2B, buyers and suppliers find one another and agree on terms, funds flow, and accounts payable and receivable departments interact.

On that last point, where back-end offices trade payments and invoices, the traditional way of doing things has been riddled with friction and pain points. Paper checks and invoices have been the norm. Buyers want to hold onto their cash as long as possible; suppliers want to be paid as early as possible.

“The 2024-2025 Growth Corporates Working Capital Index,” a PYMNTS Intelligence report commissioned by Visa, found that the integration of suppliers — through digital means, as their billing systems are linked to the buyers’ payment operations — can improve cash flow for both parties, and by extension, create B2B ecosystems that are efficient. Cooperation and communication are hallmarks of these integrations, where supplier loyalty is cemented by the fact that they do not have to chase their customers for payments, and they are not plagued by late payments. In many cases, the buyer can negotiate discounts for early payments, which in turn boosts their own cash flow.

Growth Corporates are defined as companies with $50 million to $1 billion in revenues. Among 1,297 chief financial officers surveyed across 23 countries and five global regions, a few broad trends of supplier integration emerged.

Integration means that buyers and suppliers can anticipate cash flow gaps and move proactively to bridge those gaps so that they can use cash flow solutions in a strategic manner.

Top performers integrated twice as many suppliers into their systems as lesser performers, as there was an overall 34% boost in supplier payment integration.

Top performers with the Growth Corporate pantheon paid 77% more invoices earlier than their bottom-performing counterparts.

Gains in working capital efficiency within the agriculture industry were noteworthy as 38% more Growth Corporates used external working capital solutions for strategic growth purposes, and supplier payment integration increased by 21%, which led to 20% better predictability in cash flow.

The latest report from Visa and PYMNTS Intelligence detailed that 58% of top performers improved their working capital ratios and other metrics, with a 51% shorter cash conversion cycle and 28% shorter days payable outstanding metric. Virtual cards, which are gaining ground for early invoice payments, contributed to higher index scores and more favorable supplier pricing.

Growth Corporates with the top 20% of index scores achieved an average of $11 million in bottom-line benefits, partly from supplier discounts.

Getting a bit more granular, North American and Central Europe, Middle East and Africa-based Growth Corporates saw the headiest gains in the agriculture segment, with index scores surging 17% and 19%, respectively.

In the healthcare sector, index improvements were especially pronounced among companies in Europe and the Asia-Pacific region, with a 16% increase in index scores. These gains were fueled by a 30% rise in early invoice payments compared to last year, a 7.5% improvement in supplier integration, and a segment-leading 41% surge in the strategic growth use of working capital solutions.

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