Accounts Payable Superheroes, It’s Time to Empower your Suppliers

by Steve Carter

Why does Accounts Payable Need Heroes?

When the pressure is on the last thing you need is that unwanted distraction. In Accounts Payable, it’s the Supplier inquiry. However, could this interruption by your supplier be turned into an automation opportunity. Recent data from the Hackett Group reveals that AP teams that provide self-service capabilities to suppliers can achieve Superhero status by reducing inquiries by 49% and saving 50% on master data management costs. Every Superhero needs a side-kick to achieve maximum performance, and according to Hackett’s Nicolas Walden, turning your suppliers into allies is an essential first step towards achieving AP Superhero status.. 

Bad Supplier Relationship Management is the kryptonite for AP  

Strong supplier relationships lead to new product development and innovation, as well as reduced costs and increased efficiencies. Product quality improves and the supply chain is more likely to keep humming along, despite disruptions caused by global or political events — which seem to be common these days. But procurement organizations often fall into the trap of focusing on short-term cost reduction strategies, and in doing so, fail to reap the benefits of strategic supplier relationships. Without proper guidance on performance expectations or access to the appropriate resources, suppliers face an uphill battle — and the organizations that rely on them are unlikely to realize their full potential value. In this situation, suppliers may start regarding AP team members as adversaries — and that’s a recipe or disaster.

6 Steps to empowering your Suppliers 

It’s time to join forces with you Suppliers. Having the right strategy and technologies in place clears the path to becoming an AP superhero and sets up your organization for long-term performance improvements and  profitability. Here are 6 key steps to follow:

1. Identify and nurture strategic supplier relationships.

Some suppliers are equipped to provide more strategic value than others, and it’s important to identify your most strategic suppliers so you can best prioritize your efforts. According to Gartner, engaging with internal stakeholders can help to develop a set of appropriate metrics and KPIs to evaluate which suppliers can provide the most value. Conversations should include stakeholders from engineering, product management and operations, and other areas that are impacted significantly by supplier performance. 

 2. Pay on time.

Paying suppliers on time builds trust and is the first step to improving supplier relationships. It also provides a strong indicator that you see your suppliers as allies. AP teams spend significant time negotiating contracts and terms, and they should make every effort to fulfill their part of the bargain. Take proactive steps to ensure suppliers understand the process for submitting invoices, payment terms, and proper follow-up and escalation steps for late payments. 

3. Establish formal processes.

One way you can ensure your suppliers get paid on time is by establishing formal processes. In a recent webinar hosted by Ivalua, The Hackett Group’s Nicolas Walden explained how a clear process can help to strengthen supplier relationships by eliminating complexity and confusion. “You need to create a business-as-usual type process and set clear expectations for adhering to it,” he said. Having repeatable, formal processes in place helps ensure AP teams and suppliers are aligned and understand what’s required to complete a supplier transaction. 

4. Set clear expectations.

Clearly communicating expectations both to AP team members and suppliers is critical to ensuring smooth, productive interactions. For suppliers, it’s important to provide information in advance about how they can ensure they are paid in a timely manner. This goes beyond understanding formal processes. For example, sharing tips on submitting invoices and providing contact information for appropriate follow-up and escalation channels can help prevent late payments and alleviate suppliers’ anxiety. It can also reduce the number of inquiries and complaints.

For the AP team, fostering clear supplier communication practices as part of the corporate culture reduces confusion. “Teams are often challenged in terms of specifying who can contact and interact with suppliers,” Walden said. “In some organizations, this task belongs to Procurement, and in others the responsibility lies with the AP team. So, it’s critical to be clear about proper communication channels.” 

5. Inquiry about payment status? Seize the moment.

Rather than ignoring or becoming defensive about an inquiry, AP teams can leverage conversations about payment status in creative ways. According to Walden, they provide a great opportunity for educating suppliers on how to interact effectively with your organization. “Coach and encourage your team to not only answer the immediate question, but use that contact opportunity to communicate and build on the supplier relationship,” he said. “You can also inform them of other features and digital processes that can make their jobs easier, thereby eliminating the need for them to make similar calls in the future.” 

A conversation about a late payment can also be used to solicit feedback about what the payment process looks like from the supplier’s perspective, and generate ideas for how to improve it. These types of interactions foster empathy on both sides and reinforce the collaborative nature of a healthy AP-supplier relationship.

6. Provide self-service capabilities. Self-service portals are a growing trend in supplier management. They offer time and cost savings for organizations while empowering suppliers to rapidly and easily find the information they need, whether that’s contact information, contract details, payment status or something else. Self-service portals can also serve as an effective communications channel, as AP teams can use them to post updates, notices, policy changes and other critical information. New digital features such as interactive chat bots help to improve the supplier experience and reduce the helpdesk’s workload. 

Hackett Group research shows that top performing procurement departments offer self-service features and functionalities. In fact, among top performers, 65% of inquiries are resolved through self-service portals versus 18% for their peer group. 

Forget the Cape. Instead, Automate! 

Becoming an AP superhero isn’t about making things more complex. Through automation, the P2P process becomes simple, streamlined and more efficient. An eProcurement platform that automates P2P journey can help teams implement the helpful recommendations outlined in this post, while reducing costs and effort, and setting the stage for building strong and productive supplier relationships. 

In fact, the Hackett Group’s most recent P2P Performance Study shows that organizations with high levels of AP automation save 54% on invoice processing costs and use one-third as many internal employees. Slashing invoicing costs by more than half while freeing up staff to focus on revenue generating tasks sets your organization up for success — and paves the way to becoming an AP superhero.

You can learn more about Ivalua’s P2P solutions here. Additionally, watch the full on-demand webinar, “Achieve Higher Savings & Become an AP Hero,” to learn more about the Hackett Group’s research findings.