But is it so advantageous?
A few (decades) years ago, maybe. But it definitely isn't today. Extended payment terms are only placebos, they do nothing to improve a company's cash flow.
Clearly, corporate card issuers have no interest in offering excessively long payment terms. However, they are not the only ones to benefit from short payment cycles! Other stakeholders also benefit:
We explain why renegotiating payment terms with your corporate card issuer should no longer be a priority.
On the contrary.
Companies that demand long payment terms send a very bad signal to their contacts and partners.
By giving your cash flow an extra few days' respite, you cover up possible management problems but do not solve them. This is common enough that a request for a long payment term will tarnish your image with your business partners.
By asking for 90 days of credit, you are making a confession to corporate card issuers and other partners. You are implicitly admitting that :
Of course, in reality, a credit application can show a willingness to use one's capital and improve one's working capital requirements. However, for corporate card issuers, it is more likely that the request will come from a company that still processes expense reports on an Excel spreadsheet and only reimburses its employees once a month.
Why is this?
Because companies striving to optimize their T&E procedures know that they have much more to gain from improving their management than from getting a few extra days of credit.
The corporate card is an opportunity to make real savings and performance gains - which is far better than just a delay in payment.
In short, longer payment terms are just a placebo. It serves to cover ailments without dealing with them. Even partially cover, because your contacts are not fooled: a company that demands longer than average payment terms is rarely a company that is doing well.
Many companies assume that the later the employees are debited, the better.
Why don't we ask their opinion?
Business travelers rarely choose a long payment term. It is imposed on them by the company. But they are at the heart of the T&E process, their opinion counts!
In theory, obtaining a long payment term is like offering a free line of credit to employees. As long as they issue their expense reports on time, they are reimbursed before being debited.
In reality, it's not that simple.
Using this line of credit requires extra rigor and management effort. It is difficult to force business travelers, who are increasingly demanding more flexibility when it comes to business travel, to use the appropriate means of payment and to keep business expenses separate from personal expenses.
Old-fashioned expense management does not promote employee productivity. With each business trip, employees spend time managing their expenses and issuing expense reports. Is it really up to them to manage the company's expenses?
On the other hand, a single monthly reimbursement does not help employees manage their personal cash flow. Business expenses interfere with personal expenses. Travelers are exposed to card blocking or refusal of payment due to exceptional business expenses.
When purchasing a service with a corporate card, the provider is paid by the card issuer. The issuers therefore bear the advance payment of the costs until the payment is made by the client company.
Would it be enough to pay merchants later to grant longer credits to corporate customers? No, that would not be possible. The very model of the corporate card is based on the suppliers' guarantee that they will be paid quickly after the service has been provided and in a secure manner.
Thus, only the issuer bears the cost of a long credit. This is because the advance payment is not free of charge and depends on current interest rates. The agreement of a long credit is then invoiced to the client company:
Negotiating credit extensions with issuers is therefore of little benefit to the company. It is a source of additional costs, whereas optimizing expense management with the corporate card is a savings opportunity.
So what payment term should you choose? Is the shorter the better?
References and payment term surveys, such as Atradius', indicate that standard corporate card payment terms generally meet the expectations of all stakeholders - i.e. 20-30 days credit.
Negotiating payment terms longer than 30 days is not a sustainable solution. If interest rates rise, corporate card issuers will no longer be able to meet this demand without significantly increasing the bill.
So what should be negotiated? What are the benefits of the corporate card that you should take advantage of? Today, there are many alternatives that are more advantageous than longer payment cycles.
The credit period granted by the corporate card issuer has little impact on the problems concerning the management of expenses and business travel. On the other hand, simple optimizations are sufficient to resolve most of them.
By opting for short payment cycles, you align the travel data with your bank data. The statement of your travel expenses reflects the reality of your financial flows. Real-time visibility of your cash flow is essential to manage your business travel budget.
Modernize the business travel experience
Employees' expectations are changing. This is evidenced by the emergence of new players, particularly in Fintech, who focus on the user experience, the fluidity of their solutions and dematerialisation.
No solution is based on granting additional credit days.
As you will have understood, companies have less and less interest in delaying the payment of corporate card transactions. By providing an experience that meets employee expectations, they are promoting the adoption and proper use of the corporate card. The result: less non-compliant spending, more reliable data and greater control over corporate spending.