This article throws light on how an end to end AP (Accounts Payable) and payment automation tool helps the company improve its efficiency and build strong supplier relationships.
Accounts Payable (AP) automation is a tool in which all processes related to accounts payable are handled digitally. It uses software to automate the supplier invoicing process and eliminates manual AP tasks. AP automation also reduces the chances of errors, reduces costs, and provides analytical reports to facilitate informed and data-driven decisions.
Payment automation is a tool that automates making payments to the suppliers. It manages payments made via ACH, cheque and card payments. It also contains the process of approving payments. It uses various tools to make payment processing faster and easier. Accurate payment helps to improve supplier relationships.
Maintaining good supplier relationships is essential for the growth of any business as it helps them meet customer expectations. Thus, supplier relationship management is crucial for the existence of any business. One can use AP and payment automation in the below ways to improve supplier relationships:
(1) Simplifying the onboarding process: Onboarding a new supplier requires a lot of research and analysis of its products and services. Implementation of AP and payment processing helps businesses understand the management concerns of their potential customers. It also provides easy data access and various analytical reports with its financial intelligence. This enables companies to scrutinise the potential customers to ensure that they are compliant with all the rules and regulations, especially GST, and are not fraudulent parties.
(2) Avoiding supply interruptions: Automation enables real-time updates and continuous communication between parties. Thus both parties are clear about the expectations and deliverables, leaving no room for inconsistencies. This clear understanding helps to avoid any supply interruptions at a later stage.
(3) Improved invoice compliance: As every invoice is processed via a set of automated processes, there is little chance of error. Also, invoice processing becomes much faster and easier by reducing the human interface. Thus, compliance with various e-invoicing requirements becomes much easier.
(4) On-time payments: Paying the suppliers on time is the best way to improve relationships with suppliers. It helps to strengthen trust and mutual respect. AP teams help to negotiate fair prices for the goods and services, avail early payment discounts, and avoid late fees.
(5) Greater visibility and creditworthiness: Manual processes take time and effort to check the status of any invoice, such as whether it is received, processed and approved. On the other hand, automated processes deliver higher levels of invoice visibility for each invoice related task. Companies with greater visibility have a competitive advantage. Also, supplier contracts, invoicing, payments and other financial reports are easily made available by the AP. This helps the company to focus more on expansion and other growth activities.
Payment automation ensures on-time payments, which improves the creditworthiness of the companies.
(6) Smoothens operations: AP and payment automation ease onboarding, enable smooth communication, facilitate on-time payments, and improve creditworthiness. They also negotiate early payment discounts and thus help to reduce costs and increase profits.
Manual processes such as creating payment batch files, the basis of payment terms, tedious maker-checker process, uploading payment files on banking portals, etc., hold back companies and may damage supplier relationships in the long run. On the other hand, automation gives an edge over all business processes.