As companies become more complex and grow in scale, the supplier payments process becomes more complex, time-consuming, and important. Payments to suppliers are not only crucial for obtaining the raw materials needed to run a business, but they also cover utility bills, office space rental costs, and much more.
If an organization submits a payment to a supplier late or incorrectly, it could have significant downstream implications on the company’s ability to operate. The role of accounts payable The team must monitor and honor all payments to suppliers. They must verify that invoices are correct, that goods or services have been received, and that payments are made according to the payment schedule agreed between the supplier and the purchasing organization.
Managing payments to suppliers is not an easy task, but it is perhaps one of the most critical business operations carried out daily, regardless of the industry, region or type of business. Fortunately for AP teams around the world, new tools and technologies have been developed to facilitate efficient management of the supplier payments process.
What are supplier payments/supplier payments?
Although it is known as vendor payments or vendor payments, the entire vendor payments process is much more than simply mailing a check or making a wire transfer through your business bank account. Disbursing funds is the final step in the process, but before that, companies must conduct their due diligence to ensure payments to suppliers are guaranteed, accurate and timely.
As a quick refresher, the typical supplier payment process will look like this:
- Suppliers will send an invoice to your company for the goods or services they have provided. Supplier invoice management. It starts here, requiring careful attention from your AP team.
- The AP team within your finance department should review the invoice, validate that the goods or services have been received, and verify that the amount owed is correct. If everything looks correct, they will approve the invoice for payment.
- Once an invoice is approved, payment to suppliers can be sent according to the payment terms you have with that supplier. Typically, N30 payment terms mean that an invoice must be paid within 30 days.
It seems simple at first glance, but there are many checks and balances that need to be built into the process before sending a payment to a supplier. Until recently, each step depended on the AP team; They had to manually verify invoices, match the data with warehouse receipts, write paper checks, put them on a supervisor’s desk to sign before shipping, and mail them in the correct cycle to reach the supplier on time. Now, through the use of technology, many of these checks and balances can be automatedresulting in lower error rates, faster payment terms, and a host of other benefits.
The problem of manual payments to suppliers
To understand the impact that a technology-enhanced supplier payment process can have on an organization, we must first examine the pain points so often seen in traditional supplier payment methods. If everything is done by hand and depends on humans, some of the biggest problems are:
Delayed delivery times
Many suppliers offer early payment discounts to suppliers, creating an easy money-saving tactic for their customers. However, on the other side of that coin, most impose late payment fees if they don’t receive a payment by the due date. With traditional supplier payment processes, there are many opportunities for payments to be delayed. It can be as simple as a paper invoice getting stuck in the wrong pile on an approver’s desk and going unnoticed for a few weeks. By the time that person finds it, approves the invoice, and sends it through the rest of the process, you’ll likely have already incurred a late payment fee.
Disconnected systems
Anyone who has worked in AP knows the headache of trying to match an invoice to the procurement system if the purchasing team entered the information into the system incorrectly. If your organization uses disconnected and outdated systems that cannot communicate with other systems throughout the company, you will notice a huge waste of time trying to resolve invoice errors or incorrect data entry.
Fraud risks
There is always a risk of fraud associated with sending a payment to suppliers, but manual payment processes increase that risk exponentially. Manual steps make it easy for figures to be adjusted incorrectly, for suppliers to be entirely made up of fraudsters, and for duplicate payments to go unnoticed.
human error
Even if incorrect payments to suppliers are not made with malicious intent, human error can negatively impact the cash reserves you have on hand and available. Perhaps the person who wrote the check misspelled the amount and the approver didn’t understand it. Or, perhaps, an invoice was not processed on time, resulting in a late payment fee. These errors can accumulate and wreak havoc on an organization’s liquidity and bottom line.
Non-optimized payment strategies
If you go global or work with suppliers in different countries, you will need to take currency exchange rates into account when making payments to suppliers. The right supplier payment strategies It can reduce the burden of constantly moving exchange rates, but this is not the only consideration to take into account. Sending payments in batches can reduce processing fees, and using banks with high transfer limits will make it less expensive to send large sums. It’s a challenge to get all these little details right if you’re relying on manual checkout processes.
Top tips to streamline the supplier payment process
If you’ve experienced one or more of the above pain points, it’s time to make a change. There are changes that can be made on the process side, but much of the room for opportunity exists within the technology. With AP Automation On platforms like Nanonets, most AP functions can be streamlined, optimized, and automated, giving valuable time back to the employees you have in your organization.
Depending on what your challenges are, use the following tips to create a new and improved supplier payments process:
Update your AP processes
Before implementing new technology, look at the AP processes you have in place now. Are there too many people involved? Can “fat” or additional steps be eliminated anywhere in the process? Is there an easier way to issue and send checks or wire transfers? Many companies only have current processes because “that’s how it’s always been done,” but once you unlock that mindset, you’ll find opportunities for improvement in the most unexpected places.
Invest in a comprehensive supplier payment platform
There are too many AP platforms on the market today to miss out on the benefits of using one. Find a supplier payment platform that can communicate with the existing ERP, CRM, and business systems your organization uses, and you’ll start seeing benefits instantly. These platforms can issue and print checks, allow approval workflows to complete within the tool itself, and automate the verification process necessary for each invoice. Making a payment to suppliers becomes much easier with the right tools.
Develop a Cohesive Onboarding Strategy
Before signing a contract with a new supplier, examine the company, the team you will partner with, and the products they will provide to make sure you are select the right supplier for your needs. When you start working with new suppliers, onboard them consistently. You should have a default payment structure that you typically use, dates when payments are sent to vendors each week or month, and a process for collecting information for each vendor so they are accurately represented in your systems. Do you have all the information you need for your tax forms? What happens with customs forms if the supplier is international? Everything should be stored in one place (an AP platform) and your providers should know exactly what to expect from you for the duration of your partnership.
Automation, Automation, Automation
Many AP experts are stuck verifying invoices, seeking approvals, and manually entering payment information. it’s 9pmstreet century; They should develop new strategies to optimize each payment to suppliers, work with accounting to investigate potential fraud, and spend time building relationships with suppliers. The best way to ensure they have time to do real value-added work is automating mundane tasks, such as repetitive ones accounts payable reports – that reduce your productivity on a daily basis. The right AP tool, combined with advanced account software, can validate invoice data, verify previous payments, create the check or wire transfer, and submit it for approval, all without human intervention.
Looking ahead: AP is changing
He Accounts Payable Team Role has been slowly changing for a while. Talented people who have spent their days ensuring that their organization makes correct and timely payments to suppliers have much more to offer than validating data and searching for signatures. Equipping them with an improved process and advanced tools will not only change their day-to-day life, but it will also change their relationships with suppliers, their spend management strategy, and the level of success their business can achieve.
These changes may take some time to catch on. Implementing new tools and adjusting the way people do their jobs can be a tedious journey, but it’s always worth it. Get started now – don’t let your organization fall behind.
