Maintaining strong and trustworthy relationships with your suppliers is an extremely important business practice. You rely on your suppliers to meet your needs and keep your business running smoothly, so building strong relationships based on trust, transparency, and mutual benefit should be a top priority. While there are traditional practices for creating these lasting relationships, AP automation is a key component of maintaining a solid relationship with your suppliers.
What is Supplier Relationship Management in Accounts Payable?
Supplier Relationship Management (SRM) is the process of evaluating and prioritizing suppliers based on their overall importance or contribution to a business. For small businesses with only a few supplier relationships, SRM is relatively straightforward. However, for businesses with expansive and growing supply chains, it becomes necessary to be more systematic.
The level of depth or involvement with each supplier may vary. In some cases, the relationship may be strictly transactional—that of a buyer and a seller. In other cases, the relationship may go deeper, forming a strategic alliance in which buyer and seller collaborate on common goals.
AP departments play a key role in the vendor relationship because they’re responsible for paying the vendor. If payments run late, are incorrect, or if communication between the vendor and AP department is fraught, this can significantly damage the relationship. Suppliers who regularly aren’t paid on time may withhold the delivery of goods or services or even end the relationship, leaving an organization scrambling for a replacement at the last minute.
The Importance of Supplier Relationships
Supplier relationships directly impact an organization’s ability to create value. If critical services or supplies are delayed, defective, or unavailable, a business can bleed money while operations grind to a halt.
Factors that are directly impacted by supplier relationships include:
- Cost: Both vendor turnover and failure to supply can cost an organization a lot of money. When supplier relationships are prioritized, however, the chances of service disruptions decrease and you improve your negotiation stance.
- Efficiency: Investing in supplier relationships makes those connections run more smoothly. Investing in tools to streamline payment processes not only makes those processes run much smoother, but this leads to downstream effects such as reduced time to market and ensured availability.
- Risk: By keeping supplier relationships strong, you’re more likely to be in the loop if any significant problems occur or changes are in the works.
Supplier Trends Underscore AP Performance
MineralTree’s 2021 State of the AP Report provides insights into how the AP department impacts the supplier relationship. In the report, 58% of respondents indicated that supplier relationships grew in importance. That number jumps up to 74% for those organizations whose payments had increased.
The top barrier to adoption of digital payment processes in AP departments was concern about supplier willingness to accept electronic payments (51%), indicating these departments are fully aware of how their processes affect vendors.
4 Ways AP Automation Improves Supplier Relationships
Automating supplier payment processes can help reduce costs and increase an organization’s efficiency. However, sometimes AP departments are hesitant to change their current process for fear of how it will impact suppliers. The good news is that AP automation from the right provider can quite positively impact the supplier relationship in the four ways described below.
Onboard Vendors Easily
An initial, focused enrollment campaign can contact vendors and get them onboarded—making the process easy for you, but also more straightforward for the vendor. Once information is updated in your system, vendors won’t have to worry about payment problems or delays. With MineralTree, you gain access to a dedicated team that is always active in the background, ensuring payment quality and continuously enrolling additional suppliers to maximize your benefits. Our team ensures timely payment processing, implements preferred payment methods, and responds to payment inquiries ensuring your suppliers stay happy even after the initial onboarding process.
Provide Enhanced Visibility into Invoice and Payment Status
The right AP automation solution can make it easy for vendors to log in and view the status of payments and invoices in real-time, from one central location. This means they don’t have to try to find the right person to call or email to get this information—they have it all at their fingertips whenever they need. With MineralTree’s Supplier Central offering, suppliers can view which payments are incoming and enter payment account information securely into the portal, ensuring payments arrive to the right location quickly. Enhanced visibility, remittance and payment reconciliation also enhances communication since suppliers benefit from full transparency.
Facilitate Prompt Payments
An automated AP solution makes the payment process smoother than ever. The provider will work with your suppliers to implement their preferred payment method, and the process from invoice to payment can move through the proper channels rapidly, without the same hiccups seen with traditional AP processes. When payments come faster, suppliers are happier because they have more cash on hand, making the ability to pay promptly a big boost for SRM.
Gain Visibility into Data Analytics
Many organizations need to track accounts payable metrics such as Days Payable Outstanding (DPO) or other measures that help them evaluate their internal processes and their ability to deliver value. This is true for both buyers as well as suppliers. AP automation can help both parties by providing visibility into data analytics. Because this takes the work of analyzing off the supplier’s plate, this capability is also a boon for SRM.
How MineralTree Helps Facilitate and Maintain Positive Supplier Relationships
Manual AP processes can be expensive, time-consuming, prone to fraud, and ultimately strain supplier relationships. MineralTree’s AP automation solution, TotalAP, includes the following features and tools to help support positive supplier relationships:
- Supplier Central: Advanced automation, supplier self-service, and real-time integration contribute to a portal which allows vendors to view payment status, access virtual card payments, download remittance data, and access supplier analytics.
Detailed AR and Reconciliation Data: Suppliers receive detailed remittance with their payments, allowing them to reconcile accounts receivable data quickly and conveniently.
- Insight into Incoming Payments: An intuitive portal allows suppliers to see exactly when and how their payments will arrive.
Securely Provide Payment Account Details: Suppliers can securely update their payment details, allowing your organization to limit the liability of handling sensitive payment information.
- Analytics Dashboards: MineralTree Analytics unlocks immediate access to data and automates KPI reporting and analysis, providing both buyers and sellers with real-time snapshots of their financial health.
- Manage Suppliers: MineralTree’s automated AP solution makes it easier to manage suppliers, including making payments, communicating, and generally facilitating SRM.
- Enablement: By ensuring timely payment processing, offering support to suppliers who need it, and making real-time updates of changes MineralTree ensures continuous enablement of suppliers.
- Inquiries: Using virtual cards with MineralTree means our teams will ensure payment quality and field any payment inquiries. This way, suppliers benefit from streamlined payments and buyers earn cash-back rebates on purchases.If you’re ready to take your supplier relationships to the next level, learn more about MineralTree’s AP automation solution today.