Automate vendor management in accounts payable
Vendor management helps manage two-way relationship between a company and its vendors. When a company starts to scale, its number of suppliers also doubles. This burden falls over the AP team as they struggle to balance the vendor relationships from onboarding to payment.
The only way to harmonize this without wasting a lot of time is by bringing automation into this process. From selecting the right vendor for your business to getting the best value for your money, vendor management software has an answer to everything.
Vendors are the pillars of a successful business. They do not just stop from supplying but also possess the opportunity to form a long-lasting partnership. If you establish a strong foundation here, they can also attract top-grade clients for you.
Post the vendor selection by the purchasing department, they have to be onboarded, and the orders and invoices have to be tracked, and this goes on. If vendor management is accomplished through traditional methods, there are lots of phone calls and unopened, semi-automated emails involved.
Any disruption in the process, you will find the relationship with your vendor affected. You wouldn’t want to interrupt supply chain management. Because, when they reduce the supply, your company’s overall outcome gets impacted. Delay in email acknowledgments or payments can upset a vendor and risk the supply of goods from them too.
Yet, to be able to negotiate for better deals and receive your supply on time, having a successful vendor relationship is crucial.
And this depends on how you handle your vendors’ information and leave no stones unturned in the vendor management and payment solutions.But this can be too much for the AP team to handle if the process is manual. And when you lack a centralized view of vendor data, it’s going to be much harder than you imagine.
The trust factor can be established only when there is a healthy flow of communication between you and your vendor. Having an outstanding vendor payment solution that also supports vendor management is a must for any company that wants to grow its business.
The process of choosing a vendor, purchasing a product/service from them, and maintaining a good relationship as long as it goes is called the vendor management lifecycle. It includes six steps in which a company maintains its relationship with its vendors right from their selection to decommission.
Selecting the vendor is the first step where you will attend demo sessions with prospective vendors and finalize five to six of them. After checking who can equip you at a better price, your decision-makers will approve them. Along with pricing and features, other factors a company should consider while selecting a vendor are their client stories, reviews, reputation in the industry, responsiveness, and value for money. Also, determine if they can continue to supply even if there is a sudden increase or reduction in the order.
Now that you have selected a vendor, you will move to the next step, which is onboarding their details into your company’s records. Onboarding includes the documentation process and contract signing as well. Post that, you will add them officially to your vendor list after collecting them from your vendor. It is data like currency, the preferred mode of payment, payment account details, and contact information. Depending on the size of your company and your vendor, the onboarding process may take up from 2 weeks to 4 months. Here is where you can understand more about their services/products and how they function as a company.
Post-onboarding is the period when your vendor will start supplying you with goods. Here is where you will track, analyze and understand their performance, timeliness, and quality of the product and evaluate the KPI based on their delivery. Performance tracking will continue throughout the end of the contract period.
Though you might have already done a risk assessment, it is essential to analyze it after you have onboarded them. Vendor profile examination includes law and order involvement against your vendor, data and security breaches they commit (IT breaches by your vendor’s third party suppliers, governance and compliance errors, etc). So, your job is to analyze the apparent and non-apparent risks before they happen and prevent or mitigate the effects before they could affect your company. Incorporate the consequences of a security breach in the contract beforehand and communicate your company’s standards, when it comes to security and compliance.
As the name says, this is collecting your invoice, verifying the information, and initiating the payment for approval.
You will need a storage platform to hold and monitor the information about your vendors. Proper storage medium becomes vital if the company size is big.
When you have multiple invoices to handle manually, one or two might get delayed or missed eventually. Such inevitable delays can cause you late fees and affect your future supply chain.
When you pay early, you can save money by availing of early payment discounts. And if you maintain a clean track of record by paying on time, you get better chances at negotiating for deals with your suppliers.
When you have a centralized dashboard with vendor details, you can easily track their KPIs based on their performance. Tracking helps to identify when a vendor’s performance is not up to the mark.
Processing vendor payments on time and not messing up the order-payment process can keep you in their good books. Having best payment practices can earn you excellent references, and your vendor will be ready to help you out when you are in a fix.
Workflows are instructions that tell the software how and when a payment should be processed and who can approve it. Customizing the workflows to suit the unique needs of your vendors can help you hone this process and save time for you as well. Finding the best process that fits your company and your vendor is vital to improving vendor management relationships.
While having a vendor payment solution is mandatory, upgrading that with cutting-edge technological solutions can up your game totally. The presence of AI can automate even the primary inputting job by identifying the characters and auto-filling the data in software. AI has never ceased to amaze and transform businesses and relationships between partners.
Offering multiple means of payment like a credit card, check, online applications, etc, shows that you value your vendors. The vendor should be allowed to choose the mode of payment in which he wants to receive the money for his supplies. Invest in accounts payable software with flexible vendor billing processes.
Volopay has an all-in-one dashboard in which you can see the list of vendors and their whole database giving you better visibility and control over the data. View invoices that are processed, scheduled, pending for approval, and paid along with the vendor's data, payment initiated date, amount, and receipts. Add or remove vendors anytime and find their contact information.
Categorize your vendors into individual beneficiaries and corporate based on vendor type. Set custom rules and workflows to suit your vendors’ payment requirements. For certain payments, your company would require multiple levels of approvals, and for some, it wouldn’t be necessary at all. With Volopay, Set multi-level approval for certain payments based on requirements. Ability to enjoy early pay benefits and schedule payments before time makes Volopay stand apart from its competitors.
Though the vendor payment process might appear like a two-step process, it is still possible to go wrong somewhere.
Here is how you can improve it.
In general, accounts payable vendor management software comes with a payment scheduling option. Scheduled payments prior give you enough time to go over them to quicken the approval process.
It is wise to reconcile manually or automatically through your AP software to align your financial data with your bank statements. Frequent reconciliation brings accuracy to your overall financial system.
From receiving invoices to sending payments, transfer everything electronically. Digital transformation lets you effectively process the payment and generates a permanent copy of your data.
As stated above, accounts payable vendor workflow is a series of happenings between the moment a vendor distributes an invoice and the time they get paid. It is a hectic process to set up custom workflows while setting up the invoice processing of a respective vendor. But with automation software, you can pretty much set it once for the rest of the payments to follow.
Setting the right set of rules can hasten the payment process and help you manage great relationships with vendors. You have to set up the accounts payable vendor workflow to eliminate bottlenecks in the payment process that keeps the invoice processing pending for days.
Increased administrative efficiency, reduced risks, better vendor relationships are some of the benefits of vendor management system.
Vendor management systems are cloud-based software designed to assist businesses in end-to-end vendor management processes.
Find out how to maintain good relationships with vendors and reduce supply chain costs simultaneously.