There’s a move afoot to transition from Letters to Credit to open account payments. Many supply chain execs insist it’s the way of the future, and is sure to save money.

But there’s a big IF: It only succeeds IF you’re ready to give up a major weapon in prodding recalcitrant customers to pay: Sacrificing access and visibility to the payment process.

Oh, and there’s another drawback to opting for an open account payment system: There’s less time to verify a customer’s documentation, which can potentially leave you exposed to scammers who submit fraudulent authorization requests. It also leaves the door open a little wider for applicants to submit phony financial information.

Even with all of this in mind, computer programs will continue to play a bigger and bigger role in supply chain operations. It’s the way of the future.

It’s not all bad, of course. Why would so many businesses be making the switch if it was?

Here are the big selling points:

• Critical information, such as purchase orders, invoices and other trade-related data, are electronically linked, put both suppliers and customers on the same page
• Your operational risk decreases significantly, since you and customers now work on the same platform, hosted by a bank, and working from the same sets of figures
• Reducing risk helps to reduce costs
• Both sides have equal visibility and equal access to all elements of the transaction
• Electronic billing and payments occur electronically and almost instantly, which will also save you money, and
• It’s easier to track and monitor transactions.

 These are the kinds of changes you can increasingly expect as supply chains move toward a higher visibility, lower cost future.

Tags: billing, inventory, payments, supply chain