Businesses Adapt Supplier Payment Behavior During COVID-19 P
STOCKHOLM, June 25, 2020 /PRNewswire/ -- Businesses have changed the way they pay supplier invoices during the COVID-19 outbreak according to analysis from Medius, a leading provider of cloud-based spend management solutions. While the data from Medius global customer base shows that most companies manage to continue operations at a `business as usual' level, many have changed supplier payment routines to manage cash flow and supply chain uncertainties.
Invoice data suggests many businesses operate `as usual'
Thanks to its cloud-based AP automation solution Medius can aggregate and monitor anonymized behavior data from the global customer base to identify how the current pandemic affects operations and supplier payments.
For this analysis Medius reviewed three different datapoints and compared data for March through May 2020 with the same time in 2019. The key findings:
- Supplier invoice volumes have been relatively stable compared to last year
- Supplier invoice transaction values also report at same level as 2019
- Days payable outstanding (DPO) shows significant changes
"The stability in invoice volumes and transaction values suggest that our customers are managing their businesses during the current situation without major disruption", said Per Åkerberg, CEO at Medius.
He adds: "We understand, of course, that some industries have been hit hard by the pandemic but we're pleased to see that many businesses using our cloud-based solutions are well-placed to cope during these challenging times."
Businesses use DPO metric to manage cash flow during Covid-19
Days payable outstanding (DPO) is a metric that indicates the average time (in days) that a company takes to pay its invoices to suppliers. For this analysis Medius studied data from its Medius AP Automation solution comparing the due date on the invoice with the actual payment date.
The results show that many companies have changed their payment behavior during the spring of 2020 by either increasing or decreasing their DPO. This suggests that businesses are using the DPO metric to guide decisions on supplier payment procedures to adapt to the specific challenges caused by the pandemic.
The data suggests that companies experiencing limited cash availability have increased DPO, hence paying suppliers later than previously, to manage cash flow challenges during the crisis.
Conversely, companies that have a healthy cash position have also changed their payment patterns by paying early in return for discounts or to mitigate supply chain risk. The use of discounted payment terms has increased in line with the decrease in DPO.
"Medius empowers businesses with the visibility and control buyers and suppliers need to agree and execute on optimal payment terms during this turbulent time, helping to minimize supply risk and financial impact on the community as a whole" said Daniel Saraste, SVP Product Strategy and Innovation at Medius.
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