Why flexible payment tools are key to working capital optimization

In today’s economic climate, working capital matters more than ever for growth companies. It’s always been a critical measure of an organization’s financial health. But with the increased velocity of doing business, the importance of working capital access has skyrocketed.

In the past, finance leaders calculated working capital based on historical financial data. Without access to current data, companies frequently experienced negative cash flow and poor financial decision-making. It’s a common problem: almost two-thirds of small to medium businesses struggle with ineffective cash flow management. 

But the tides are changing. More CFOs are proactively using external working capital solutions, accelerating the shift toward smarter payment tools. Visa recently teamed up with PYMNTS for an in-depth look at middle-market companies—the 2024-2025 Growth Corporates Working Capital Index. 

Over 1,200 CFOs and Treasurers around the globe were surveyed, highlighting the unique working capital challenges and opportunities facing “Growth Corporates” (growing companies between $50 million and $1 billion in annual revenue).

The study reveals a notable shift among these companies toward strategically leveraging working capital. Over 80% of CFOs now tap into external working capital solutions, not just for emergencies but proactively—to smoothly manage cash flow and fund strategic initiatives. That’s a solid 13% jump from last year.

How CFOs are rethinking working capital strategy

At the heart of the transformation are CFOs who are shifting from a reactive, crisis-driven approach to proactive, strategic method of managing working capital. 

A large part of what’s driving this shift is the availability and adoption of digital, on-demand working capital solutions like virtual cards. The biggest problem with prior solutions, like working capital loans and bank lines of credit, was the slow approval process. Virtual cards offer finance teams instantaneous fund access with structural financial controls that prevent unapproved spending. Top performers in the VISA study increased their virtual card usage by 32%. 

With this increased access to flexible solutions like virtual cards, CFOs now think of working capital as a growth lever. It allows them to move more quickly when the need arises. One big benefit is that companies can make financial decisions independently without having to resort to external financing. With this new-found agility, finance leaders can invest working capital in:

• New products and services
• Entering new markets
• Acquiring relevant businesses
• Scaling operations with automation and AI

Responding CFOs in the VISA study reported a 16% increase in the use of working capital for strategic purposes. Almost half of those surveyed reported more predictable cash flow and improved operational efficiency.

CFOs are also transforming their approach to payments by creating their own payment ecosystems and making early payments to vendors. Companies benefit from these changes with stronger supplier relationships, more favorable payment terms and pricing discounts. In the VISA study, businesses using working capital experienced the following: 

• 27% collected payments faster
• 26% paid suppliers faster
• 58% improved working capital ratios
• 51% shortened cash conversion cycles

Increased access to working capital has also empowered CFOs to streamline operations, increasing efficiency, scalability and visibility into real-time financial data. They now have both the time and the tools to make informed decisions related to cash flow and working capital. This new-found ability makes the business more resilient in the long term, protecting it from market volatility and economic downturns. 

Using modern tools to reduce costs and improve cash flow

Virtual cards have revolutionized our payment processes so that transactions are faster, safer and without the use of paper

Luke Pritchett, CFO at PEX

One of the most impactful tools in a CFO’s arsenal is access to virtual and corporate cards. They are the third-most popular working capital option for top-performing Growth Corporates. Take a look at the chart below – as you move from bottom- to middle- to top performers, usage of virtual and corporate cards for working capital increases in ranking. 

Top-performing CFOs see virtual and corporate cards differently than their lower-performing counterparts. While lower performers see them only for payables use cases, top performers view virtual and corporate cards as applicable tools for both payables and financing. 

As part of using virtual and corporate cards, top performers are changing the way they do business. Rather than relying on longer net payment terms for suppliers, top performers are shifting to early payments. Virtual and corporate cards offer a unique benefit, in that they extend the buyer’s payment timeframe while still meeting the seller’s need for liquidity.

Those top performers paid 37% of invoices early in 2024, up 21% from 2023. Early invoice payments can help them reduce costs, as suppliers paid early are more likely to offer lower pricing. 

Another big benefit is the inherent level of control associated with virtual cards. Finance teams can use virtual cards for one-time use or set specific spending limits, blocking vendors from making additional charges. These controls reduce extra costs associated with expense fraud, unapproved spending and non-compliance.

By leveraging digital solutions like corporate and virtual cards, CFOs now have improved cash flow visibility and increased working capital efficiency. Integrating suppliers into payment networks using corporate and virtual cards reduces payment friction. That means it’s easier to pay vendors and get paid by customers. And the digital nature of corporate and virtual cards improves tracking, leading to better cash flow visibility – and a 12% increase in cash flow predictability. 

Companies embracing these working capital solutions saw tangible improvements, including shorter cash conversion cycles, better supplier relationships thanks to early invoice payments and significant cost savings —on average, about $11 million annually, marking a whopping 300% increase from the prior year.

How PEX’s virtual cards drive supplier loyalty and early pay discounts

At PEX, we’ve always understood these dynamics—that’s exactly why we created our PEX Visa® Commercial Card product. We’ve built our underwriting engine from scratch, leveraging the latest AI technology to unlock credit lines significantly higher than traditional corporate cards. This empowers Growth Corporates to optimize their working capital, seize early payment discounts and strengthen supplier relationships by making timely invoice payments.  

The PEX Visa® Commercial Card provides unmatched flexibility, instant access to capital and robust, intuitive controls tailored specifically for your daily operations. The combination of higher credit limits and vendor virtual cards offers you precise cash flow optimization and enhanced control, translating directly into meaningful savings. Using these features, PEX customer Artisan Capital was able to free up $150K in working capital. 

Learn how PEX’s working capital solutions can support your business’s growth. Contact us for a customized demo.