Summary
Early payment programs help companies strengthen supplier relationships, improve cash flow, and build more resilient supply chains. To meet a rising demand for early payment options, procurement professionals should prioritize flexibility and transparency when designing programs. By combining multiple solutions, such as supply chain finance and dynamic discounting, and leveraging technology, companies can drive measurable outcomes. Optimizing liquidity and supporting long-term growth in today’s market hinges on adapting to supplier-led demand.

TOC:

Rising supplier demand for early payments

Key success factors for early payment programs

Bridging the gap between procurement and finance

Building flexible, multi-solution payment programs

The role of technology in payment strategies

Making the most of early payments: 5 recommendations for procurement leaders

Early payment programs play a vital role in helping companies build trust with their suppliers and make their supply chains more resilient. Suppliers, meanwhile, can benefit from early payment programs in multiple ways, from improving cash flow to increasing their stability and building stronger relationships with customers.

Given the myriad challenges of the current market, it’s no surprise that suppliers are becoming increasingly proactive in requesting early payments. Indeed, SAP Taulia’s 2024/2025 Supplier Survey found that interest in early payments is higher than ever, with 63% of suppliers expressing an interest in early payments.

During a recent webinar, industry experts from Visy, ANZ Bank and SAP Taulia discussed the growing trend of supplier-driven early payment requests, and what this means for procurement leaders.

Here are five takeaways from the discussion.

Lesson 1: Supplier needs have fundamentally shifted

Business conditions continue to present significant challenges. Alongside geopolitical uncertainties, access to credit is tightening up – and higher interest rates are taking their toll on suppliers, particularly those that had invested in growth when rates were lower.

At the same time, suppliers continue to experience issues as a result of late payments from their customers. As James Brown, Head of Market Management at ANZ Bank observes, late payments have a “domino effect” that impacts small businesses, hindering their ability to pay their own suppliers.

This challenge is magnified by the focus many small businesses are placing on certainty over their cash flows. In practice, this may mean that when companies receive invoices, they pay them straight away in order to gain clarity over how much money is available. But this places additional pressure on suppliers’ working capital, which is made worse when customers pay their invoices late.

Given these challenges, it’s no surprise that suppliers are increasingly requesting and accessing early payments from their customers – and businesses need to meet this shift proactively by offering solutions that meet their suppliers’ needs.

As Bob Glotfelty, Chief Growth Officer at SAP Taulia, recalls: “I’ve spoken to many suppliers over the last ten years who have said, ‘If it wasn’t for an early payment program, we would have gone out of business.’”

Lesson 2: Flexibility and transparency are crucial in early payment programs

When it comes to implementing an early payment program, flexibility and transparency are both important success factors.

Where transparency is concerned, it’s important to be clear with suppliers about how they can benefit from a program, says Richard Xuereb, General Manager of Finance (APAR) at paper, packaging, and recycling firm Visy. “But at the same time, we need to tell them what we’re going to gain. Of course there’s something in it for us. We’re trying to stay healthy. And the better our credit rating is, the better we can help suppliers, because their cost of funding is going to be lower.”

On another note, Xuereb observes that early payment solutions need to enable supplier choice. As such, it’s important to be clear with suppliers about the options available to them.

“Everything we do in the supply chain finance space, or in dynamic discounting and virtual cards, is all 100% supplier choice,” he explains. “If I can’t convince you, it’s better for you not to do it.”

Lesson 3: Bridge the gap between Procurement and Finance

In many companies, procurement and finance teams are somewhat disconnected from each other. But given that early payment programs affect both working capital and supplier relationships, cross-functional collaboration is essential to a successful program.

As Brown explains, early payments is one area in which finance and procurement can come together and truly collaborate. “The traditional way of banks looking at working capital is to look at a company’s receivables, payables, inventory, and cash conversion cycles, and provide solutions that solve the working capital gap at a very high level,” he says.

“But once you get behind the curtain and see the actual data behind the suppliers, you can see where solutions like early payments can actually have direct benefits on a supplier, rather than at the finance level.”

When introducing a program, it’s essential to achieve internal alignment between the relevant departments. For procurement-led programs, this should involve consulting finance and treasury teams, and making sure all parties are aware of the goals of the project. Without this type of collaboration, there is a risk that programs will fall short of achieving their stated goals.

Lesson 4: Leverage an agile toolbox, not a one-size-fits-all approach

It’s also important to realize that the different flavors of early payment programs are not mutually exclusive.

By combining different programs, companies can offer their suppliers a more flexible approach to suit the needs of different businesses. For example, Visy has opted for a multi-pronged approach, which includes virtual cards, supply chain finance (SCF), and dynamic discounting.

As Brown explains, each of these types of programs can deliver early payments to suppliers, but each has different characteristics that provide different benefits.

“SCF has a really important role for a certain part of the supply base; virtual cards work exceptionally well for another part of it,” he notes. “Dynamic discounting gives the buyer some benefits when they have excess cash.”

Lesson 5: Make strategic investments in technology to reduce friction

Many businesses are looking to reduce manual intervention and friction in their payables and collections processes through strategic investments in technology.

For one thing, visibility into the status of invoices is non-negotiable when it comes to the success of an early payments program. “We needed to make sure that our invoice processing was as efficient as we could,” explains Xuereb.

“A supplier will see the invoices that have been loaded. They can monitor the invoices, so they can rest assured that the invoice they sent to Visy has actually been processed. It will tell them whether the invoice is blocked. It will tell them when the invoice is due.”

Likewise, suppliers need to have full visibility over the payment options available to them. And automation is essential when it comes to making sure that programs are both scalable and auditable.

By partnering with a vendor like SAP Taulia, companies can streamline the experience for their suppliers, with easy enrollment and access to full payment and invoice-level detail. What’s more, our flexible funding model makes it simple to offer both supply chain finance and dynamic discounting, while providing suppliers with a consistent experience.

Conclusion: Supplier-led flexibility is the future

The shift to supplier-led early payments is a transformation, not a trend. Organizations that can adapt to their suppliers’ evolving expectations will be better placed to build stronger and more resilient supply chains while optimizing their liquidity strategies.