Effective cash flow management is essential for the financial health of any business, and in the competitive landscape of the UAE, it’s even more critical. Companies across the UAE face unique liquidity challenges, particularly when dealing with suppliers who expect timely payments. A growing solution to these challenges is the use of corporate credit cards for supplier payments, offering businesses a way to extend their (DPO) credit period while simultaneously providing suppliers with early payments, creating a win-win scenario.
Understanding Cash Flow Challenges in the UAE
Cash flow issues are a common concern in the UAE, where businesses frequently encounter delays in receiving payments. These delays cause a ripple effect throughout the supply chain. A 2023 survey by Atradius found that 39% of companies in the UAE face significant challenges due to late payments. These delays can strain a company’s cash reserves, making it difficult to meet obligations such as payroll, rent and crucial downstream supplier payments.
For medium to large corporates, managing these cash flow challenges is essential, particularly in industries where margins are tight and the cost of capital is high. Traditional payment methods, such as cheques or bank transfers, often lack the flexibility needed to navigate these issues effectively.
Leveraging Corporate Credit Cards for Extended Credit and Supplier Benefits
One of the most effective ways to manage cash flow is by leveraging corporate credit cards for supplier payments. This approach allows companies to extend their credit period without putting pressure on their cash reserves. Instead of paying suppliers through bank transfers or checks, businesses can use their corporate credit cards to pay suppliers immediately, while enjoying an additional 50 to 60 days (depending on the card issuer) to settle the payment. This extended credit period can be invaluable for companies seeking to maintain liquidity and ensure smooth operations.
For suppliers, the benefits are equally compelling. When a buyer gains an additional 60 or so days of interest free credit, it’s now able to pay its suppliers earlier, using an automated card-to-bank solution. Early payment improves suppliers’ cash flow, allowing them to reinvest in their operations, manage their own financial obligations more effectively and reduce the time and resources spent chasing overdue payments.
Expanding Payment Options for Suppliers
In addition to early payments, suppliers gain the advantage of adding a new payment method to their repertoire. By accepting payments through corporate cards, suppliers open up a new avenue for receiving payments from other clients as well. This flexibility can be particularly valuable in the UAE market, where diversifying payment options can attract more business and reduce the risk associated with relying on a single payment method.
Moreover, offering the ability to pay by card makes a supplier more attractive to buyers who prefer the convenience and financial benefits that come with using corporate credit cards. This added flexibility can enhance supplier relationships, positioning them as preferred partners in the eyes of their clients.
The Added Benefit of Rebates and Cash Back
Beyond the benefits of extended credit and early payments, corporate credit cards come with rebate programs that can add to a company’s bottom line. Many corporate cards offer cash back on transactions, effectively turning routine payments into a source of additional revenue. For instance, a company spending millions annually on supplier payments could potentially receive a significant rebate, which can then be reinvested into the business.
In a market like the UAE, where operational costs are high, and margins are constantly under pressure, these rebates can provide much-needed financial relief. They can help offset some of the costs associated with running a business, from office supplies to travel expenses.
Automation: The Next Step in Payment Evolution
While using corporate credit cards offers clear benefits, the process can be further enhanced through automation. Automated card-to-bank solutions, like Swipe2B, eliminate the need for manual intervention, reducing errors and ensuring that payments are made on time. Automation also streamlines the payment process, freeing up the finance team to focus on more strategic tasks, such as financial planning and analysis.
For UAE companies, which often deal with a diverse and global supplier base, the ability to automate payments is a game-changer. It ensures that suppliers are paid promptly, improving relationships and leading to better pricing and payment terms in the future. Additionally, automation can reduce the risk of fraud, a concern that is increasingly on the radar of businesses as they expand their digital capabilities.
Why UAE Companies Are Embracing the Change
The trend toward using corporate credit cards for supplier payments is growing in the UAE, particularly among medium to large corporates looking for ways to optimize their cash flow. With the added benefits of extended credit periods, cash back, early payments and the expansion of payment options, it’s no surprise that more and more companies and suppliers are adopting this approach.
With providers of card-to-bank solutions, UAE businesses and suppliers can work with partners who understand the unique challenges of the regional market. Swipe2B’s solution continues to be adopted by several local and Fortune 500 companies across the GCC, helping them streamline their payment processes and unlock significant financial benefits for both buyers and suppliers.
A Strategic Move for Buyers and Suppliers
For companies looking to improve their cash flow and gain a competitive edge, leveraging corporate credit cards for B2B supplier payments is a strategic move. With the right approach, businesses can enjoy extended credit periods, earn rebates and benefit from automation, while suppliers can receive early payments and offer more payment options to other clients. As more companies and suppliers recognize these advantages, the adoption of B2B card payments continues to rise, driving greater efficiency and financial stability across the region.
