Citi® Optimized Pay Reimagines AP
Citi Optimized Pay is an innovative card-based early payment tool aimed at removing friction from AP processes while lowering bank charges and building working capital strength. In a conversation with Tom Alford, Deputy Editor – TMI, Ritesh Jain, B2B Product Head, EMEA Commercial Cards Treasury & Trade Solutions, Citi, explains how this solution is revitalising the world of card-based supplier payment programmes.
There is no question that robust working capital management is important for the success of any business, but the ways in which it can be improved have come under close scrutiny over the past few years. A number of approaches have been put forward, with optimisation of AP by extending payment terms often cited as a key step.
But in the real world, extending terms can come into direct conflict with the need for supply chain resilience. Paying suppliers later can have a disruptive impact on their cash flow cycle, which can lead to supply chain interruptions. Extending terms unfairly also has legal and regulatory implications in some jurisdictions, and most large companies these days actively seek to avoid the negative publicity brought about by the exposure of unfair corporate payment practices.
Meeting these competing demands is a challenge. The idea that card payments can solve the issue has been mooted many times over the years. Certainly, a credit card can be used very effectively by individuals as a way of deferring payment to the issuer until next month. In the business world, T&E and P-cards (commercial cards) are in common usage for the same working capital ends, often with longer terms available. But stretching the commercial card concept into the AP realm has never really taken off, despite its well-understood capacity to pay suppliers early while delaying buyer cash outflows.