Dive Brief:

• SAP Ariba is offering new payment and financing options to allow for greater payment visibility and help to ensure on-time payments to suppliers. It is partnering with American Express to bring these features to its network, the companies announced in a press release. 
• SAP Ariba users will be able to connect their existing American Express card to their account to create "virtual" card payments. Users can then set up the amount and timing of these payments using the virtual card. Without the virtual card, a static card number is used by the system, which does "not provide the control, flexibility or security of a virtual card number that is unique with each purchase," an SAP spokesperson wrote to Supply Chain Dive in an email.
• This would streamline the payment process and allow suppliers to get paid in a more timely fashion, the companies claim. It also allows for quicker reconciliation thanks to the visibility the system provides. "Suppliers will also benefit from this rich data and track payment status," a spokesperson told Supply Chain Dive. 

Dive Insight:

Speedy payments are not just important for the supplier, but for the buyer too, Deloitte pointed out in a report on the management of accounts payable.

"In some cases, delaying payment can erode supplier goodwill, resulting in slower delivery times, less willingness to fix defects, slower responses to queries and more onerous payment terms," Deloitte wrote. "On the flip side, paying early can sometimes yield substantial benefits in situations where suppliers offer discounts or rebates for early payment."

This issue is underscored for suppliers when companies begin to express signs of financial difficulty. Years of sluggish revenue at Sears eventually led to the company owing its suppliers millions. "I suspect, but cannot confirm, it was risky for suppliers to sell their products through Sears," Peter Edlund, senior vice president at DiCentral, a supply chain software company, told Supply Chain Dive last year. 

And some of Tesla's suppliers have voiced worry about the car company's ability to pay on time due to cash flow issues. A survey of Tesla's suppliers conducted by the Original Equipment Suppliers Association​ resulted in 18 of 22 respondents saying they think Tesla represents a financial risk to their company and that Tesla has asked for price reduction for their products.

In order to properly manage payables, a company's accounts need to be up-to-date and accurately reflect balances. "Without this data, many businesses lack visibility into how much, how often and when they pay their suppliers. This can hamper you from choosing the most advantageous payment terms or selecting appropriate timing in which to pay vendors," Deloitte wrote in its report. 

One step Deloitte suggests for making this happen is the automation of reconciliation, which is what SAP Ariba aims to provide through its partnership with American Express.