April Fools 2019

Corporates Turn To 365-Day Payment Terms To Manage Cash Flow

Inspired by Amazon’s new Prime offer, Amazon Day, CFOs and corporate cash managers are transforming their payables operations so that they pay suppliers on the same day each year.

Dubbed PayDay, the aim is to streamline payables operations and eliminate the friction associated with having to track and pay invoices throughout the year for all of the suppliers businesses do business with. On the condition of anonymity, sources have told PYMNTS that the beta tests for this project have done extremely well, with support swelling from others who have heard about the results.

“Now, accounts payable departments will have to work just one day a year,” said one beta test participant, adding that it has already saved them a ton of money and time.

Other test participants laud the move as transformative.

“Gone are the days of struggling to manage cash flow and having to keep up with suppliers’ 30-day payment demands,” remarked another test participant. “Plus, we love keeping our cash for that whole year — what could be better?”

When questioned about the pressure on suppliers to go 364 days without being paid, one CFO who declined to be identified said that PayDay creates certainty of payment, something that is missing now with the current processes.

“B2B vendors will love their yearly ‘payday,’” he added. “Suppliers will secure a single lump sum once a year, and accounts receivable staff will no longer have to chase down customers for invoice payments on a daily basis.”

She added that suppliers should “embrace” the recent trend of lengthening payment terms, rather than resist it.

Economists and industry analysts say that waiting 365 days to receive payments on all invoices will have a positive impact on suppliers’ own accounting and accounts receivable processes, too.

“As long as companies can adequately budget for the year, receiving one big payout on all outstanding invoices at one time will be an enjoyable experience,” one such analysts said of PayDay and the potential impact on vendors. “B2B suppliers have often struggled to receive payment from their corporate customers within 30, 60 or even 120 days after an invoice is issued.

“By giving their corporate customers up to a year to pay their bills, they no longer have to nag clients on a weekly basis. Plus, 365-day payment terms are more likely to be honored by the corporate customer than shorter, less reasonable payment terms, like 60-days.

“Considering how much power large corporate buyers have over their supply chains, small supplier should really be grateful they’re getting paid at all,” he added.

It is rumored that banks and FinTechs are also behind the PayDay initiative and are already gearing up to offer businesses a whole new suite of credit and cash management tools to help businesses of all sizes adjust and adapt to this new payments innovation.

This story was written as part of PYMNTS’ annual April Fools’ Day edition, all in the spirit of good fun. Any resemblance to real news is purely coincidental. We hope you enjoyed it.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out our April 2019 Unattended Retail Report. 

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