Strategic Payables for Working Capital Management
Written By
Andrew Parker
EVP, Head of Global Treasury Management
Treasury teams are no longer judged only on cash visibility. Today, the mandate is broader. The focus is on improving liquidity, increasing efficiency and managing risk to directly support working capital optimization.
One of the most practical ways to do that is through payables. While receivables and inventory tend to dominate working capital conversations, payables determine when cash actually leaves the business and how much control you have over that process.
When payment methods and workflows are fragmented, costs rise quietly and oversight gets more difficult. A treasury-led payables strategy can reverse that. Payables should be evaluated through a working capital lens and prioritized using a simple framework based on value and risk.
Why Payables Matter to Working Capital
Every payables decision affects liquidity because it controls:
- When cash leaves the organization
- How efficiently the payment is executed
The timing matters, and so does the method. Each choice changes the tradeoff among cash retention, operational workload and risk, which can influence days payable outstanding (DPO) and supplier relationships.
Payment types come with different cost and value profiles. Some introduce direct fees. Others reduce effort through faster processing, stronger controls or, in some cases, rebate income.
Those tradeoffs show up in day-to-day execution. Manual workflows can create bottlenecks and limit visibility into outflows, while standardized, automated processes speed execution and provide treasury with cleaner data to forecast cash and manage risk.
That’s why payables mix optimization belongs at the core of treasury management. Rather than forcing every payment through a single rail, treasury teams can match each payment to the method that delivers the right balance of cost, value, efficiency and risk.
The Payables Waterfall Framework
In a strategic treasury operation, payment methods are prioritized based on the value they create for your organization, with a move down the list only when a higher-value option doesn’t fit the use case.
A typical waterfall starts with cards, then moves to ACH, followed by wires and finally checks. Each step down the waterfall generally increases cost, manual effort or risk while reducing strategic benefit.
Credit Cards (Top of the Waterfall)
For many organizations, business credit cards sit at the top of a modern payables strategy because they can extend DPO without straining supplier relationships. An organization pays the card issuer on its statement cycle, which helps preserve liquidity while the supplier still receives funds promptly.
It’s also worth noting that cards are the only mainstream payment type that can generate revenue through rebate programs. When spend is routed through a business card program, issuers may pay rebates based on volume and, in some cases, merchant category. That can offset payables costs and create a source of incremental return.
In addition, cards tend to offer strong fraud protection and well-established dispute management processes. That shifts risk away from your internal team and reduces exposure compared to many other payment types.
Finally, card programs typically come with streamlined processing and enhanced controls. Virtual cards, in particular, can be tokenized, limited to specific amounts and tied to individual transactions, thereby improving auditability and reducing misuse.
That said, not every supplier accepts cards, and they’re not always cost-effective for every payment amount or category. Still, when acceptance and economics align, commercial cards often sit at the top of the waterfall because they combine DPO extension, tighter controls and streamlined execution in a single method.
Supplier reluctance to accept card payments often signals an opportunity to revisit underlying trade terms. In such cases, close coordination between treasury and procurement is critical to jointly evaluate alternative levers, such as negotiating early payment discounts, to preserve working capital efficiency.
ACH Payments
Next up are ACH payments, the workhorses of high-volume, recurring payments. They offer a low-cost, reliable way to pay suppliers such as utilities, payroll-related vendors or subscription-based services.
Compared with wires, ACH generally carries lower transaction fees and less operational friction once vendors are onboarded. For standardized relationships, it provides predictable settlement and easy reconciliation when paired with strong remittance data.
From a treasury payables perspective, ACH is a core rail for scale. ACH payments may not extend DPO as cards do, but they support efficient cash forecasting as treasury teams can control the timing of payment delivery and keep processing costs down. In a well-designed waterfall, ACH usually sits just below cards as the default option for vendors that don’t accept card payments.
Wire Transfers
Wire transfers remain essential for transactions where speed and finality matter most. They are commonly used for mergers and acquisitions, real estate closings, cross-border settlements and certain capital markets activity.
However, that certainty comes at a price. Wires are typically the most expensive electronic payment method, and they carry higher operational risk when controls are weak.
For that reason, wires work best as a targeted tool rather than a default for routine payables. A treasury-led approach sets clear criteria for when a wire is appropriate, supported by thresholds, dual approvals and standardized workflows.
That said, when used selectively, wires preserve their core benefits without driving unnecessary cost or exposurebout why you’re the right buyer — and why this is the right practice for you — will help strengthen your application.
Checks (The Last Resort)
Checks usually sit at the bottom of the waterfall because they are the most resource-intensive method to run at scale. Printing and mailing add direct costs, and reconciliation and exception handling add labor and delay. Checks also settle more slowly, limiting visibility into outflows and complicating cash forecasting.
Risk is also higher relative to most electronic methods due to fraud exposure and lost or intercepted payments. Suppliers often experience additional friction as well, since they must wait for delivery and then complete deposit processing before funds are usable.
Many organizations still rely on checks because some suppliers insist on them, or internal processes haven’t been updated. Rather than treating checks as a permanent rail, the waterfall approach treats them as an exception path. Over time, the focus shifts to moving check volume to electronic methods through supplier enablement, standardized onboarding and rules-based routing.
Automation as a Force Multiplier
Maintaining payables mix optimization is tough without automation. Spreadsheets and inbox approvals invite exceptions, and those exceptions quickly become the process. Before long, routing decisions vary and policy enforcement starts to slip.
Automation restores discipline, which is what strong working capital management depends on. With an integrated treasury management platform, rules live within the workflow, keeping decisions consistent regardless of who processes the payment or how busy the team is. Fewer handoffs and approval bottlenecks speed up cycle times and reduce errors. Treasury also gets stronger visibility across payment types, backed by standardized workflows, role-based controls and audit-ready approval trails.
Most importantly, when embedded within an integrated treasury platform, automation makes the waterfall workable at scale. Rules-based routing can pick the right method based on vendor preferences, transaction size, urgency and risk.
Over time, optimization becomes part of everyday execution instead of a periodic clean-up project
Treasury-Led Payables Strategy
Accounts payable handles the day-to-day processing. Treasury sets the guardrails and keeps the work pointed at the outcomes that matter.
Once that ownership is clear, the operating model tightens up. AP can run a consistent workflow, and treasury can use real payment data to spot where the mix is drifting and course-correct before small issues become expensive habits.
Progress should show up in the numbers. For instance, if DPO is trending in the right direction, cost per payment is coming down, and exceptions and incidents are shrinking, you can see the strategy is improving working capital in a measurable way.
Treasury leadership matters even more because none of this remains static. Vendor preferences change, new payment options emerge, and risk evolves as a result. Regular review keeps the waterfall relevant and prevents a once-strong strategy from becoming a slow leak.
The Strategic Payoff
Better terms and faster receivables are important factors, but working capital is often won or lost at the moment a payment goes out.
Turning that into a repeatable advantage takes more than a one-time project. That’s why many teams partner with a treasury management specialist to design and implement a payments approach that fits their goals today, then keep refining it as needs and risks change.
To learn more about how a modern payments operation fits into a broader treasury approach, visit Banc of California’s Global Treasury Management page.
CONNECT WITH A RELATIONSHIP MANAGER
COMPLETE THIS FORM OR CALL
877-770-BANC (2262)