3 card strategies to optimize working capital management in the year ahead

Year end is not about winding down, but gearing up new strategies for working capital management in the year ahead. For CFOs at venture-funded companies, Q4 is a great time to leverage commercial card strategies to optimize liquidity, centralize financial intelligence and extend cash runway.

Here I’ll dive into three proven best practices for your corporate card program: dynamic payment terms, integrated finance data, and custom card controls to improve liquidity.

1. Optimize working capital management with dynamic payment terms

Fast-growth companies often struggle to manage working capital when moving forward requires a steady stream of spending. A commercial card makes it easier to control the balancing act – especially if you take action to build in flexibility with dynamic payment terms.

What does that look like? You can finesse it in various ways:

• Leverage float. Does your commercial card have a billing cycle that provides some float? While many traditional business cards have the usual 30-day cycle, some issuers (like SVB) offer extended terms that give you an additional 25 days before payment is due. That extra float can provide a lift as you wait for receivables to come in.

• Seek card payment advantages. You might also consider a reverse approach, by using your corporate card to pay vendors early to take advantage of discounts. If you’ve been handling payables with paper checks, talk with your suppliers about paying by card. It gives you more flexibility on when you send payment, and it’s faster and safer than checks. An added bonus is that your business earns cash back rewards or revenue share on that card spend, which also contributes to improving working capital management.

Year-end planning opportunity: Identify high-volume spend categories where shifting to card payments could extend your cash conversion cycle. Then tap your procurement leads to engage and onboard key vendors in early Q1.

2. Centralize financial intelligence through your card program

Is your company still dealing with fragmented financial data across multiple systems? Effective working capital management relies on having an integrated, centralized hub for managing finance. Without it, your leadership team lacks a complete picture, and the insights needed to make better decisions.

Remember, your commercial card is more than just a payment tool; it’s a strategic data source. So put it to use effectively:

• Integrate your finance data. You don’t want card data to exist in isolation. You also don’t want to risk time and errors manually collecting that data and entering it into other systems. To better manage working capital, your card program should include real-time automated integration with your ERP or accounting software. It ensures you have a highly efficient centralized hub for financial intelligence.

At SVB, for example, our AI-powered spend management platform uses easy API integration to connect your card program to your other finance systems. The platform then seamlessly streams card data to the integrated system for faster, more accurate reconciliation. And if you want to capture richer card data, you can issue virtual cards with custom coding to better track details about procurement, travel and other expenses.

• Create real-time spending analytics dashboards. When you centralize spend around a single commercial card with integrated expense management, the platform enables easy access to rich payment data to identify spending patterns and seasonal trends. These insights help you improve budgeting and forecasting, as well as uncover savings opportunities. For instance, you might consolidate vendors to reduce costs, and spot ways to cut unnecessary spend.

I’ve seen clients use card-level data to support the CFO’s broader financial planning and strategic initiatives. It’s a valuable asset and helps demonstrate financial discipline to your board and investors.

3. Improve liquidity management by leveraging your corporate card

Like many companies, you might have a disconnect between your commercial card program and your treasury operations. Yet with the right approaches, you can control card spend dynamically to better support liquidity and working capital management.

A treasury-integrated card strategy focuses on using your card program as a flexible buffer. For example, drop the set-and-forget mode of issuing cards for procurement, business travel and other expenses. Instead, adjust card limits based on your cash positions and forecasts.

With real-time visibility and data-driven insights, you can carefully track cash flow patterns. Then issue virtual cards that give you the flexibility to make changes on the fly, such as modifying card budget, timeline, spend categories and more. It can help you better control card use and reduce unnecessary or excess spending.

Insights on cash position, forecasts, and spending patterns can also inform decisions about scaling your card program’s credit limit. Having more credit agility may help you avoid dipping into liquidity reserves, so they can continue earning high yields in interest-bearing accounts.

Learn how SVB commercial cards give you dynamic capabilities to meet needs faster and optimize working capital management.

Frequently Asked Questions

How can commercial cards improve working capital for venture-funded companies?

Some commercial cards help companies improve working capital management with extended payment terms for more float. For instance, SVB allows up to 55 days before payment is due. Additionally, paying vendors by card instead of checks can enable early-pay discounts and provide more cash flow flexibility.

How can we make better financial decisions with card payment data?

Centralizing spend on a single corporate card gives you accurate, data-rich insights such on vendor-level spend patterns, category trends, employee expense behavior, and more. With insights from card data, you can negotiate better supplier terms, identify cost-saving opportunities, and improve forecasting and resource allocation.

How do we optimize commercial card limits to manage liquidity?

Use commercial card data to track your utilization, spending patterns, seasonal needs, etc. Look for opportunities to adjust employee card limits to avoid unnecessary spend. And use insights to determine how you might scale your card program’s credit limit to give you more flexibility, while preserving liquidity.