Thinking of Paying Suppliers by Credit Card? Here's 7 Reasons Why You Should

Gone are the days where corporate credit cards were solely reserved for high-ranking executives who used them primarily for Travel and Entertainment purposes. 

With the growing prevalence of credit card usage in the B2C sector, innovative Fintech start-ups like Pliant and Mynt are extending the convenience of credit card payments to B2B transactions.

These advancements come with the added benefits of streamlined reconciliation and claims processes, offering a time-saving boon for Accounts Payable (AP) teams.

It's also crucial to keep up with evolving financial preferences. Surveys reveal a shift among Gen Z employees, who now prefer alternatives to personally covering upfront expenses and waiting for reimbursement. 

As such, the corporate world must adapt and explore different financial tools that align with the changing mindset. 

Here’s 7 reasons why companies should consider using corporate credit cards for seamless and efficient payment processes.

1. Access interest-free capital

An obvious advantage of using credit cards over other financing options is the immediate access to interest-free capital.

In fact, most major card issuers offer up to 55 days of interest-free grace period. 

The interest-free grace period on corporate credit cards offers a unique flexibility, allowing companies to manage short-term financial requirements without incurring additional costs. 

Credit cards vs. Loans

In the current discourse dominated by the cost of living crisis, attention turns to the financial tools businesses choose. 

Corporate credit cards outshine bank loans with their interest-free grace period. Unlike the average interest rate on bank loans, which has surged from 1.5% to over 5% in the past year alone, credit cards offer a cost-effective solution for managing short-term financial requirements. 

2. Readily available solution

Securing a corporate credit card with extended credit line is easier than traditional financing options such as supply chain financing and invoice discounting, which require a strong corporate credit rating.

Supply chain financing

In supply chain financing, the buyer's credit rating must exceed the supplier's, as suppliers seek funding for their invoices from a bank or third-party provider.

This effectively limits the number of corporations that are eligible to apply for these loans. 

Invoice discounting and factoring

Invoice discounting and factoring may also provide a quick alternative to bank loans for businesses with imperfect credit. 

However, they are not without significant risks. 

One of them includes the late fees. Simply put, the later your customers pay, the more you will be charged. This is on top of the initial percentage fee that the supplier has already charged. 

For recourse factoring, corporations are liable for their customer’s debts and will have to buy back any unpaid invoices from factors. 

This could push them deeper into debt. 

In most cases, customers are aware that a factor has taken over the collection of their invoices, which might affect relationships and present a less-than-favourable image of a business. 

Corporations with less robust credit ratings can thus leverage credit cards as an accessible working capital finance solution.

3. Negotiate early payment discounts

According to the 2023 European Payment Report, the average European business corporation dedicates approximately 10-and-a-half hours each week to chasing for late payments. 

This translates to roughly 74 days annually, time that could have been more productively allocated to the growth and development of the business.

Delay in receiving payments subsequently results in companies paying their own suppliers later. 

In a bid to get paid on time, many suppliers offer an average discount of 4.1% for early settlements. 

With credit cards, businesses can make on-time payments while unlocking valuable discounts and managing their own cash flow. 

4. Identify potential rewards and cost-saving opportunities

Credit cards provide detailed transaction records, which allows corporations to gain greater visibility into spending patterns.

In addition, organisations can consolidate all their non-business critical spend on to their card programme. 

This feature gives corporations a more complete overview of their expenditures, which will pave the way for informed decision making.

For instance, companies can identify specific spending patterns and recognise recurring vendors, enabling them to negotiate favourable deals and achieve significant cost savings.

5. Build and improve business credit rating

One of the primary ways corporate credit cards aid in building a credit rating is by helping businesses establish a credit history. 

As companies consistently use and repay their credit card balances, they contribute positively to their credit report. This demonstrates a reliable track record of financial responsibility.

Timely payments on corporate credit card accounts showcase financial prudence and responsibility. 

This consistency may send a positive signal to credit agencies, demonstrating that the business is a reliable borrower and can be trusted with credit.

6. Streamline payments with automated payment features of your card programme 

Many corporate card issuers like AMEX offer an AP automation solution. 

This empowers corporations to centralise their supplier invoices on a unified platform, significantly enhancing visibility and transparency over their expenditure. 

Additionally, this automation solution allows corporations to sync payments into a single billing cycle. They can optimise cash flow by retaining funds for extended periods. 

A unified billing cycle also simplifies tracking and management, providing businesses with a streamlined approach to AP. 

7. Reduce TCO of supplier invoices

One of the key takeaways from an interview conducted with Billhop’s CFO, Ingemar Sjögren, is the importance for enterprises to grasp the total cost of ownership (TCO) of their supplier invoices. 

In the interview, Ingemar notes that the typical onboarding process for suppliers in large companies can be extremely complex, from conducting extensive supplier due diligence to creating purchase orders each time they transact with these suppliers.

Research shows that it can take up to 6 months for a large organisation to onboard a single supplier onto their ERP systems. 

Unfortunately, this applies even to one-time, non-business critical suppliers. 

The cost for invoice processing and ERP supplier registration can vary anywhere from 200 to several thousand euros. On top of that, there are annual renewal and maintenance fees associated with using an ERP system. 

As a result, the processing costs for a single invoice can be exorbitant, ranging from 10% to well over 100% of its principal amount.

Paying suppliers by credit card can eliminate the need for costly supplier onboarding processes, which is especially useful for reducing the TCO for one-time, low-volume supplier invoices.

The Case for Corporate Credit Cards 

The case for using credit cards to pay your suppliers is plain and simple: On top of accessing higher credit limits to pay suppliers on time and in full, corporations can get up to 55 days of interest-free credit. 

It’s a short-term financing solution that does not appear as a debt on the balance sheet. 

By providing a means to unlock cash flow and improve working capital, credit cards effectively allow corporations to bridge the gap between when they have to pay their suppliers and when they get paid.

Unlike other financing options, card payments could be treated like accounts payable. Corporations can easily leverage their credit cards to foster a healthier balance sheet.

Unlock 100% Card Acceptance with Billhop 

While there are numerous benefits to paying suppliers by credit card, the vast majority of payments in Europe are still made using the SEPA Credit Transfer (SCT) programme. 

A potential explanation for this might be the limited acceptance of cards in the B2B sector. 

Suppliers are largely discouraged from accepting credit card payments due to the burden of high processing and interchange fees. 

Here’s where Billhop can be your solution to overcoming these limitations.  

Regardless of your business niche or payment requirements, Billhop empowers corporations to make credit card payments to nearly any supplier. 

Our commitment to security is reflected in our SOC 2 Type II compliance, and our dedicated Operations team meticulously ensures compliance with the strictest standards for each supplier.

Experience a new era in payment efficiency with Billhop. Contact our sales team today and unlock 100% card acceptance with ease.