If you want a healthy and innovative supply chain, you must streamline your invoice approval process to pay sellers promptly. You do this by changing processes and systems, educating your suppliers, creating flexibility in your payment methods, enhancing your internal and external communication, and dealing with any issues proactively.
Previously, we looked at three reasons it makes business sense to pay sellers promptly. Most businesses acknowledge these reasons and recognize the value paying quickly creates. But the fact is, even when businesses want to pay sellers early, they can’t because they’re held back by broken processes, legacy technology, and complex organizational structures that create operational inefficiencies.
Given these challenges, even the best-intentioned businesses struggle to pay their sellers promptly. But there are some practical steps businesses can take to fix this.
Improve your systems and processes
Businesses often pay sellers late because their systems are outdated—something which typically leads to broken processes. So even if a business wants to pay its sellers promptly they can’t because it takes too long to receive and process invoices.
In order to solve for this, companies must make digital transformation a priority—and we don’t mean merely using tools to digitize your current processes. This may work fine as a band-aid and drive short-term benefits, but you’ll still likely encounter inefficiencies. If you want impactful change, you need to rethink your processes and harness the new generation of networked platforms. When you do this you’ll create clear, efficient and effective processes to ensure you pay invoices promptly.
Buyers always get the blame for late supplier payments, but it’s not always their fault. Sellers are sometimes guilty of sending invoices to large companies without due care and attention. As a result, the invoices get lost somewhere in the system and aren’t processed or paid.
Buyers can educate their sellers to rectify this problem. They should give suppliers clear information about where to send invoices, what information they must include and in what format. Buyers should also adopt and push their sellers to use e-invoicing wherever possible. These solutions do much of the hard work for sellers and give the best chance of ensuring they’re paid as quickly as possible.
There will always be disputes with sellers. It’s important that when these arise they’re dealt with quickly and proactively. If you do, you’ll ensure there’s minimal impact on the relationship and business can continue as normal.
Supply chain relationships are dynamic and constantly evolving. Yet with payments, many businesses stick to a known formula that doesn’t appreciate the needs of the relationship. And this is when issues arise.
Leading businesses create flexibility in how they pay their sellers to solve this. For example, buyers are leveraging purchasing cards for smaller transactions. These ensure sellers are paid quickly and efficiently without using their own capital. For larger transactions, buyers are looking to use supplier financing tools that give sellers the option to accelerate payment to meet their cash flow needs in return for a discount on goods purchased or a working capital extension.
Buyers and sellers need to engage in frequent and honest communication. They should highlight any issues proactively and look to find solutions quickly. You can do this by arranging a monthly catch up with sellers, or by using modern solutions that are built with collaboration at their core.
Getting it right
Focusing on these areas and driving improvements will go a long way to helping your company process invoices faster and pay your sellers promptly. And when you do, you’ll open up a host of strategic opportunities to better manage your supply chain and your cash.
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