Not having enough time is the bane of every AP team. Too many are still burdened by the labor- and time-intensive tasks of manual invoice and payment processing, and are paying a heavy price for it. This creates a never-ending cycle of inputting and coding data, tracking down people for approvals and authorizations, and preparing checks – not to mention stuffing, sealing, and mailing payments. In addition to the tremendous inefficiencies and cost of this manual process, it also leaves AP teams with little to no time to focus on other important finance functions, such as vendor and spend analysis which are crucial to improving operations and reducing costs.
On top of all this, vendor inquiries continually interrupt AP teams throughout the day. These interruptions not only distract and frustrate staff, but they also add more to the workload and inefficiencies. Unfortunately, this happens all too often to AP teams across the country. According to the MineralTree 2022 State of AP survey, 43% of AP teams spend six or more hours each month fielding inquiries from vendors. Of that total, 10% of teams spend 10-20 hours monthly responding to suppliers, while 8% spend more than 20 hours each month.
On the flip side, payment inquiries are also a sore spot for suppliers. In the same survey, vendors reported that following up on invoice status is their #1 pain point in the entire customer payment process. This is likely due to the time and energy it takes them to connect with an AP team, let alone wait for them to track down the necessary information to answer their question. This often turns into a frustrating waiting game. Today, almost half of vendors (44%) don’t feel that their customers’ AP teams respond to them in a prompt and satisfactory way.
But it doesn’t have to be that way. Today’s blog shares best practices to help your AP team address vendor inquiries more effectively and efficiently.
6 Ways to Improve Vendor Inquiry Management
Here are top insights from our team of AP experts that will help your team better manage inquiries from your suppliers:
Agree on Payment Terms
Determining realistic payment terms through your IOs and SOWs at the outset of your vendor relationships is the first step to improving your vendor inquiry process. Agreeing to terms and setting expectations up front can preclude many vendor issues down the road.
Set a Standard Method for Inquiry Submissions
Make your life easier by establishing a single place where vendors can inquire about payments. That way you don’t have to check multiple sources throughout the day, such as phone, email, and fax. Centralizing these communications into a single location also reduces the chance that inquiries will fall through the cracks.
Respond in a Timely Manner
Prioritize speedy responses to vendors. Supply chain issues have underscored the importance of maintaining strong relationships with vendors, and responding to them quickly will go a long way in accomplishing that. Start by analyzing your current average response time for answering vendor inquiries. Next, set a goal to improve or maintain that response time – and use this goal to hold your AP team accountable if response times start to lag.
Make it Easy to Find Information that Vendors Need
It takes too much time for AP staff to manually track down payment statuses, which contributes to vendors’ concerns about their customers’ response times to their inquiries. However, automating the invoice and payment process increases critical visibility for the AP team across the entire workflow. This allows them to easily see each and every invoice – along with relevant information to answer inquiries, like when the invoice was processed, who approved it and authorized payment, and where the payment currently lies in the payment workflow.
Minimize Late Payments
Despite the fact that fast payment is of top importance to vendors in the customer payment experience (84% list it as their top priority), late payments have become all too common – particularly for teams using manual AP methods. These paper-based processes make it easy for teams to lose invoices, bogging down the approval and authorization workflow. AP digitization alleviates these problems by automating these tasks, tracking every invoice simultaneously, and ultimately streamlining the entire AP workflow. Since the majority of vendor inquiries focus on payment status, teams can significantly reduce their overall volume of inquiries simply by paying vendors promptly and minimizing the number of late payments.
Use ePayments to Pay Vendors Faster
It’s time to lay checks to rest. Not only do they pose greater security risks than other forms of payment, but they also cost more and take more time to prepare. Savvy AP teams are turning to ePayments to speed up delivery and provide greater visibility to vendors. Virtual cards, in particular, are increasing in popularity because they provide the most secure and fastest payment option; enable vendors to easily reconcile their books; and provide valuable cash-back rebates to AP. This is another tool to expedite payments and provide more visibility to vendors, which will decrease the number of inquiries from suppliers.
Say Hello to Automation, and Goodbye to Late Payments and Vendor Inquiries
As we’ve touched on above, AP automation is key to reducing and organizing vendor inquiries. Further, it has the distinct ability to improve the experience for strategic vendors submitting questions, as well as the AP staff answering the inquiries. Digitization not only enables AP teams to speed up invoice processing and payments, but it also provides a central repository of all invoice and payment data so AP teams can easily access the information they need to quickly respond to vendor inquiries.
Forge Biologics Supports Rapid Business Growth with MineralTree
Forge Biologics, which develops and manufactures gene therapies, is one example of how AP automation can optimize invoicing and payment processes. Forge Biologics’ two-person AP department had previously invested a lot of time manually inputting and coding invoices, and primarily used paper-based checks and wire transfers to pay their vendors. The firm’s rapid business growth eventually began to overwhelm the AP team with invoices and prompted it to find a more efficient approach to AP processing. They turned to MineralTree’s TotalAP solution to automate their invoice and payment process. This end-to-end AP automation tool also includes separate workflows for PO & non-PO invoices.
By moving away from paper checks and wire transfers, Forge Biologics now makes 90% of its payments electronically and was able to earn $80k in rebates from using virtual cards in one year. Beyond racking up valuable rebates, virtual cards as well as other ePayments serve as the fastest and easiest way to pay suppliers. As a result, Forge Biologics was able to accommodate an increasing invoice volume without adding headcount to AP, cut costs and processing time, and keep their critical vendors happy by ensuring they were paid in a timely manner. The new solution also increases visibility across its AP workflow, making it much easier for the team to answer vendor inquiries.
Removing AP’s Burden of Vendor Inquiries with Managed Payment Services
While AP automation goes a long way in reducing vendor inquiries, it can’t eliminate them entirely. Many AP teams that struggle to hire qualified professionals amid growing invoice volumes are realizing the benefit of offloading the time-consuming inquiry process to a team of professionals specifically assigned to this task. This not only helps the AP team reduce their overall workload, but also provides faster and better service to their valued vendors.
The MineralTree payment inquiry support service provides vendors with a dedicated team that responds quickly and professionally to all vendor inquiries, freeing AP to focus on other important tasks. While some providers offer self-service portals as a solution to the inquiry issue, most vendors don’t actually take advantage of them. In fact, industry data estimates that only about 20% of vendors use them, likely because they need to go to different portals for each individual customer.
By contrast, an inquiry support service (like MineralTree’s solution) makes the entire process seamless and easy for vendors, while reducing interruptions and the AP workload. These payment service teams can provide additional services to boost digital payments without increasing the AP workload, including virtual card enrollment and proxy payments.
There’s no doubt about it, vendor inquiries are a fact of life for every AP team, and it’s critical to respond to them in a timely manner. Automating the invoice and payment process, and using a payment service partner like MineralTree can help savvy AP teams reduce their manual workload so they can put more time and attention into strategic projects. At the same time, their vendors can easily and quickly get the information they need about pending payments. It’s a winning solution all the way around.