Many times, the relationship between an accounts payable department and the vendors whom they pay can be described as a fluctuating “love/hate" scenario.
Consider... Employees in various departments in any given company rely on the goods and services that vendors provide in order to do their jobs effectively. Civic organizations such as cities and townships rely on vendors to maintain and improve our communities. In return, vendors appreciate the business they receive and a relationship is born that can last for years. This is the “love” part of the vendor management accounts payable relationship.
On the flip side, the "hate" starts when Accounts Payable department staff simply can't keep up with the influx of paper invoices and other documents which must all be processed manually, from system entry (even scanning!) through data entry, comparing the information, and every step through payment. As the piles grow into mountains, documents get lost or misplaced and errors are made, all resulting in late payments to the very vendors the company relies on.
To make this type of situation even worse, vendors also have to spend their time tracking down payments owed. Often there is a snowball effect. For example, in the case of the construction industry, if the vendor doesn't receive timely payment, then they in turn may need to delay payment to their subcontractors. Not being able to pay your subcontractors in a timely manner is news that spreads quickly and compromises the vendor's ability to find, contract, and retain the best team for what they require.
While the "love" part is generally associated with profit, revenue, and possibly even lowered costs, the opposite is true when it comes to "hate." Financial costs come by way of late payment penalties. Equally costly is the amount of time spent on mundane, repetitive tasks such as tracking down approvals, looking for documents, and trying to pacify angry suppliers. Less tangible costs emerge in the form of damaged supplier relationships, with delays not only being disrespectful but putting the suppliers themselves at risk for disruptions in cash flow. If this continues on a constant basis, the company may very well find themselves searching for a new supplier.
It’s a vicious cycle but leveraging accounts payable automation can put these struggles to a halt.
What if you could remove all of these hazards and improve any aspect that affects the vendor management accounts payable, simply by removing the paper-based, manual part of the process?
The good news is that you can do exactly this thanks to an AP automation software solution. Automating the invoice and payment process with an advanced cloud-based platform solution like Yooz will solve all the pain caused by a manual process from purchase-to-payment, even while supporting a dramatic improvement in vendor relationships.
Thanks to automation, invoices received in any format - paper, electronic, SML/EDI, etc. - can be easily input into the system where advanced technologies powered by Artificial Intelligence (AI) such as Optical Character Recognition (OCR) will read the data, smart data extraction can be customized to know exactly where to place the data, and Machine Learning (ML) will recognize the information, push populate fields, and send the invoice through for approval and payment.
Cloud-based AP automation means that the designated approving manager (customized in advance and changeable with just a few clicks) can easily access the system from any desktop or mobile device at any time 24/7. No delays required in reviewing or working on approving invoices.
Management also has real-time, complete visibility throughout every step, not just where the invoice is at any time in the4 approval process but also a history of every touch along the entire workflow. Questions can be answered with quick, internet-search type capabilities, information is available for improved decision-making capability, and records are easily kept and accessed for audit and tax purposes.
Finally, with the ability to cross-check incoming data for errors, duplication, and other fraudulent attempts while removing the need to input and transport documents, security is increased.
All of this together reduces the processing time from weeks to days - sometimes hours or less - while providing status updates to suppliers. Businesses also have the chance to avoid late payment penalties and lock-in early payment discounts, perhaps even becoming a new source of revenue.
Simply by implementing automation and freeing themselves from the drudgery of a manual AP process, the entire organization can proactively initiate vendor conversations around strategic, partnership-building topics such as reduced pricing or other improved terms. By being paid on time (or at the very least know the exact cause of any delay at any time) suppliers are able to pay their subcontractors and supply chain partners. The circle is happily complete.
Here’s what Terry Leak, director of finance for the City of Cleburne, Texas has to say:
“One of the most valuable benefits for us has been speeding up payments to our contractors. This allows us to get a wider choice of contractors bidding for construction projects, and to keep the best ones coming back. When we pay them faster, they can pay their subs on time. It has created a lot of goodwill between the city and our suppliers”.