Inflation says: accept cards now

USD inflation is ever-occurring. It’s happened every year (except one) in the last sixty years. The average rate of inflation over that period has been 3.8% per year. That’s 1.04 basis points per day. Read on to learn why you may want to consider accepting credit cards from your customers.

What is the real cost of days sales outstanding (DSO)?

How many Days Sales Outstanding (DSO) are on your books? For a hypothetical company with a DSO of 45: over the last 60 years, they would have lost 46.8 basis points to inflation while waiting to get paid. That's a significant cost.

But it’s a cost that’s been largely ignored. Between 2012 and 2021, inflation averaged around 2% per year, or 24 basis points on a 45 day term.

But in 2021 / 2022, numerous factors such as the COVID-19 pandemic, Russia’s invasion of Ukraine and changes in consumer demand have led to supply-chain shortages and high inflation. In May 2022, the Bureau of Labor Statistics reported an annual inflation rate of 8.6%. 

8.6% inflation spread over a 45 days of sales outstanding is 106 basis points, more than a full percent. Now, we’re talking about a serious cost to carry your customers' debts.

In this environment, credit cards offer an appealing solution. When you accept credit card payments from your customers, they pay faster. You can even require them to pay within a certain term in order to accept their card payments.

Your buyers are highly incentivized towards using cards. They love the rebates and the 30-days of float they get from issuers. Billtrust has seen businesses open the credit card channel and turn check-paying customers that took months to pay their bills into credit card-paying customers that would pay within one week. 

At the May 2022 annualized rate of inflation, every day your sales are outstanding, your business is losing 2.35 basis points. Those losses add up fast. And it’s changing the math for accepting credit card payments. 

Additionally, your customers want to pay with credit cards. In commodity industries, accepting cards is often a competitive advantage. 

Interchange rates, automated processes and the Digital Lockbox

Working with a solutions provider like Billtrust, you can achieve lower interchange rates than you might be expecting. Our sophisticated solution processes card payments with Level 2 or Level 3 data, lowers rates and saves you money. 

It’s also worth examining the ergonomics of credit cards in addition to their economics. Credit card payments are primed to be integrated into automated processes like Billtrust’s Digital Lockbox. The Digital Lockbox is an email inbox where all emailed credit card payments are sent or rerouted. The Digital Lockbox opens emailed payments, processes them and then captures remittance and sends it along to cash application workstreams. 

So, credit card payments are your buyers’ preferred method, they are especially suited to automation and customers make credit card payments much sooner that ACH and check payments. 

This is an issue that cannot wait. If you’re not accepting credit card payments today, or if you haven’t optimized your acceptance process, then Billtrust can offer quick and significant benefits. You’ll lower your DSO, better your customer experience and lose less to inflation.

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