Many UK corporates are losing out on nearly £7bn in early payment discounts each year by not investing in financial technology – a shortcoming that can reflect an “inflexible culture” within finance teams, according to a study.

A chief financial officer’s leadership style and willingness to invest in their financial and accounting software has a tangible impact on their business’ bottom line, a notable instance being UK corporates losing out on billions of pounds each year in early payment discounts, according to a study by Barclaycard.

Faced with tighter margins and increased pressure to meet KPIs, businesses are turning to their accounts payable platforms to help them achieve their goals, with four in ten businesses – 40% – looking to upgrade their financial and accounting systems in the next one to two years.

The Barclaycard study, however, found that over a fifth (22%) of 500 finance heads surveyed believe their accounting software is out of date. This can have significant financial implications, with one in six (16%) respondents saying their systems do not allow them to take advantage of early payment discounts – pre-agreed discounts for paying suppliers earlier than their standard payment terms.

By capitalising on early payment discounts, businesses can achieve significant savings. Using economic modelling, Barclaycard identified that UK corporates currently save a total of £14.4bn in early payment discounts each year. This equates to an average of £75,389 per business.

However, there is a clear opportunity for improvement: the modelling also revealed that companies not making the most of early payment discounts are leaving an estimated £6.7bn on the table each year.

Resistance to change

The biggest barrier to investing in finance technology is an “inflexible culture”, says the study, with 40% of businesses that have not invested in their software in the past five years citing “resistance to change” as one of the main reasons.

When asked how existing systems could be improved, more than four in ten (44%) would like more automation, and nearly a third (32%) said they would like to add functionality that automatically matches supplier invoices against purchase orders.

The study says one way for a business to achieve this is to integrate their payments solution directly into their procurement platform. This can save finance teams significant time and effort, helping them pay suppliers more quickly, and ultimately capitalise on early payment discounts more often.

Decision-making style is key

Based on the findings of the survey, Barclaycard concludes that a CFO’s ability to impact their business’ bottom line, whether by implementing new accounting software, driving efficiencies or managing risks, can be greatly dependent on the way in which they make decisions.

And the credit card and payment services provider believes that as a result of the study, it has identified that CFOs’ decision-making styles fall into four categories:

• Conformists – CFOs that rely on tried and tested systems and practices and are therefore more reluctant to adopt newer approaches and technologies.
• Resourceful traditionalists – Those that place more emphasis on insights gained from previous experiences when making important decisions, but who are potentially open to new approaches.
• Explorers – CFOs that are prepared to consider and explore new and improved accounts payable technologies and processes, and who also tend to be more prepared to take on board insights gained from data analytics.
• Trailblazers – CFOs that are motivated to investigate, actively trial and speedily implement new and improved ways to do their job, and who have been able to maximise efficiencies and cost savings as a result.

Barclaycard’s economic modelling identified that companies with trailblazer CFOs at the helm are significantly outperforming their peers; on average, businesses led by a ‘trailblazer’ CFO capitalise on almost 98% of the overall discounts available, equating to savings of £82,818 per business each year.

In comparison, businesses with a ‘conformist’ CFO typically take advantage of only 52% of the discounts available, securing an average of £68,478 per business each year, which is the lowest of all the CFO types. Conformists therefore stand to gain the most by adopting a best-practice approach, which could see them achieve an estimated average uplift in discounts of £18,675 each year.

Marc Pettican, Managing Director of Barclaycard Commercial Payments, says: “CFOs have the critical responsibility of driving growth by optimising their business’ financial performance. Our research shows that CFOs that embrace technology not only achieve tangible savings for their organisation, they also streamline business processes and paperwork, even when faced with resistance to change.

“The latest innovations in B2B payments, such as integrating payments directly into the procurement journey, can save finance teams significant time and effort, helping them capitalise on early payment discounts more often. CFOs play an essential role in advocating and piloting these new technologies, helping their organisation to stay one step ahead of the competition.”

The survey was conducted on behalf of Barclaycard by Opinium Research in February 2019 and involved a survey of 500 senior financial decision makers in companies with a turnover of £6.5m or more and who do not outsource their accounts payable.