Businesses are essentially living and breathing entities. They have a brain, a heart, and a pulse. Board of Directors and/or executive management and leadership is analogous to being the brain, with the heart (or hearts) residing potentially in various corporate locations or capacity (subject to sufficient debatable where I will forego any metaphors here). But it’s safe to say for most commerce, suppliers are the life-blood of any business. The pulse of any business is largely determined by the ebb and flow of supplier relations and the (OEM) goods, services, inventory, etc. that they provide. You can have the best business plan, with all the supporting capital, personnel, and systems in place to execute, but if your supplier is negligent, your end product or service will be hindered as a result. Without that smooth circulation of blood which suppliers facilitate, business, like a person with clogged arties, become at risk of being susceptible (at best) to heightened fatigue and diminished energy or (worst case scenario) prone to high blood pressure, cardiac arrest, and even death. Is there any real difference to operational bottlenecking and blood-clots? No; there isn’t. When suppliers are delayed or negligent, this creates potential of operations bottlenecking, similar to clotting the current of blood throughout the body.
So the question simply is this, how does one keep the business bloodline flowing smoothly and avoid these pitfalls? The answer is really quite simple; keep your relationship with your supplier healthy and engaged. Easier said than done; perhaps. But like any well trained doctor, I’m here to make a prescription. A not overly complicated one either.
Just as exercise and eating healthy is so obvious and so simple, yet undoubtedly the best way to keep blood pressure down and circulation flowing smoothly – my prescription to keeping supplier relations healthy is equally obvious and ridiculously simple; Pay your suppliers. Pay them on time. Pay them accurately. If and when questions or issues arise – resolve them quickly. How best to achieve this, doctor…you ask? Again – the answer is so simple, so obvious – exercise regularly with accounts payable solutions that maximize automation.
Automated AP solutions provide a means to ensure that your supplier obligations are being satisfied in an efficient and timely manner. When optimized to fullest capabilities, simple AP Automation can also translate to securing cost savings and discounts as well as provide channels to improve lines of communication (as well as increase the quality of the information around communications) with your suppliers. Aberdeen Group AP/AR 2015 Benchmark Survey reveals just some of the ways top financial management organizations are taking advantage of this (see figure 1).
Figure 1: The capabilities Leaders’ maximize for AP relationship management
AP automation can ensure timely scheduling, filtering payments by priority, and remove human interaction to complete this transaction. When successfully completed – the customer captures this early payment discount and remains in good, or improved standing with the supplier and strengthens the relationship as such – potentially setting themselves up for better savings being offered in the future at the time of terms-renegotiations. Such terms may include Early Payment Discounts. Early payments discounts, such as “1%/10 Net 30” is a mutually beneficial service; if such a term is part of an agreement this means the buyer will receive a 1% discount of payment if the bill is paid in entirety within 10 days otherwise the total amount is due in 30 days. This is mutually beneficial because it means the supplier is recouping revenue faster, but also the buyer is saving money.
Not to down-play the obvious in suggesting that timely payments make for strong supplier-customer relations; they most certainly do. However, these successful relationships are defined by more than just that – such as the ability to manage inquiries, and review discrepancies or issues around invoice management efficiently, and with swift resolution. The data above in Figure 1 illustrate the capabilities that Leaders excel in, which allow them to better work through inquiry management.
Centralized invoice management means that when employees are assisting to research and resolve issues or discrepancies, the information on single repository is far less likely to be disjointed or siloed in other locations. Transactional audit-trail capabilities significantly empower employees to complete associated tasks around inquiry reviews. Unsurprisingly, Leaders are 87% more likely to have complete transaction historical capabilities (see Figure 2).
Likewise, the ability to match invoices to purchase orders equally help resolve any potential discrepancy. Leaders are 19% more likely to have this capability available to them, compared to Followers. The ability to match invoices to goods receipt or services acknowledgment allows suppliers to close out sales cycles with automated alerts indicating that the product or serviced has been effectively rendered to the customer. Seemingly insignificant, this simple common courtesy doubles as a verification system as well, around close-of-sales inquiry management. And as is true with all relations, common courtesy never goes out of style.
So, if you want to remain healthy and keep you blood pressure low and reduce threat of heart problems, the take away here is simple; eat your fruits and vegetables. Keep stress to a minimum. Exercise regularly. The same remains true with business. Consume valuable data. Minimize internal and external inquiries and stress around them and us Automated AP solutions as the means to consistently exercising those capabilities which will strengthen the relationship with your suppliers – because when all is said and done, suppliers are your businesses life-blood.