04 March 2021

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Why it pays to consider alternatives to BACS

If your business requires supplies, uses parts or carries inventory, then it faces a constant balancing act. On one side, ensuring ready availability of essential items, on the other avoiding ‘dust-gathering’ stock.

Under-provision, and you can end up missing a sales opportunity. Over-estimate, and you risk tying up valuable funds that your business could use elsewhere.

So how do you get it right? The main methods of optimising your supply chain purchasing include:

  • Using analytics to improve demand forecasting
  • Accelerating supply chains and applying ‘just-in-time’ logistics
  • Maintaining stock buffers but only for high turnover items

But no matter how good you get at stock-flow management, cashflow remains crucial to delivering goods and making sales. How you choose to pay suppliers for stock – whether for sell-on, as components, or for ops and maintenance – can affect success.

How BACS could be holding you back

Over the past decade supplier payment by cheque has been phased out. Most businesses now use bank-to-bank transfers such as BACS.

Although cheap, standardised, and compatible with most account systems, BACS payments have several disadvantages that could be holding businesses back.

  1. They can take 3-5 days to clear for suppliers
  2. They can only be processed in working hours
  3. They may need special software or a bureaux service to make bulk payments
  4. They are typically facilitated by accounts teams

The rise in business expense card payments

Smart businesses want to pay suppliers faster (to ensure priority and continuity of supply) while keeping cash in their bank for longer.

Achieving this is easier than you think. Most suppliers and wholesalers readily accept card payments for large and regular purchases.

Business expense cards, such as Allstar Plus, let you pay suppliers instantly while giving your cashflow extra wiggle room to recover. As long as you clear the balance within the agreed repayment time frame, there are no credit fees or payment/transaction charges.

Here are four other ways a business expense card can add to your payment toolkit:

  1. Rebates or loyalty points
    Some cards allow businesses to turn transactions into cash back or other incentives such as Amazon vouchers
  2. Supplier discounts
    Paying early with a card can enable you to negotiate early payment rates or discounts with your suppliers
  3. Cost effective line of credit
    Used alongside other funding such as business current accounts, cards such as Allstar Plus provide interest-free credit which is useful during seasonal/high activity spikes
  4. Lower the admin strain
    Most good card payment solutions also come with expense tracking and management software enabling your business easy tracking and analytics of outgoings

If you want to give your supplier payment arrangements more flexibility (and keep suppliers and stakeholders happy), perhaps it’s time to think outside of the ‘BACS-box’.

Explore more rewarding alternatives with Allstar Plus

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