While you always knew that your vendors were important, your relationship with them today may feel especially high-stakes given the lingering pandemic-related supply chain disruptions. If so, you’re not alone. Nowadays understanding what matters most to your vendors could mean the difference between remaining a preferred customer with ongoing access to the goods your business needs, or having to wait for shipments.
That’s why this year, for the first time, MineralTree asked both AP teams and their vendors what’s on their minds in our State of AP 2022 report. The survey, which addresses key AP challenges, trends, and opportunities, found that a growing number of AP teams are more concerned about their vendors than in previous years. In fact, nearly 71% of finance leaders reported that their supplier relationships grew more important over the past year, up from 58.5% in 2021.
3 Things Vendors Want from Accounts Payable
So, what must AP do to woo its vendors? Using data pulled directly from this year’s vendor survey, here are three key insights on how to build a strong AP strategy that wins over suppliers.
1. Getting paid on time is critical.
By far, the number one priority amongst vendors is getting paid on time. In the survey, vendors’ top response to what is most important to them in the payment process was the speed of payment (84.4%), followed by payment accuracy (67.2%), processing cost (52.2%), and quality of remittance data (46.1%). Unfortunately, a combination of market issues, including supply chain disruptions, hybrid work and lean AP staffing, have created multiple payment challenges.
Logistical breakdowns in the supply chain, such as delayed or partial deliveries, have caused processing and payment delays. Hybrid work makes manual invoice and payment processing more time consuming and difficult, requiring AP staff to go into the office to pick up invoices, manually route them for approval, and collect signatures and authorizations for payment. The great resignation and other hiring priorities have left many AP departments not only understaffed, but also without good prospects for qualified candidates.
Manual invoice and payment processing compounds these problems. These labor-intensive, error-prone methods slow down operations, often leading to late payments. It’s nearly impossible to consistently provide prompt vendor payments using manual methods, especially in difficult market conditions.
2. Vendors are not happy with AP’s response to inquiries.
Cash flow is critical to vendors, enabling them to continually produce more goods, as well as to ensure their financial health. Because of this, they are vigilant about payment status and often reach out to AP for updates. Unfortunately, many vendors are disappointed with the response time they receive, and cite inquiries as the biggest pain point in the payment process.
Nearly half of them did not feel that AP responds to payment-related inquiries in a prompt and satisfactory manner. In addition to the problems that queries cause for vendors, it also adds hours of work for AP teams each month. With many AP teams overburdened, understaffed, and relying on outdated manual AP methods, it’s easy to understand why they are unable to respond as quickly as vendors would like.
3. They want more ePayments, but blame companies for slower progress.
An overwhelming number of vendors want to receive more ePayments next year (82.2%) because of the benefits they offer, including more timely payments (85%), processing efficiency (79.4%), improved remittance (43.9%), cost savings (39.4%), and increased security/fraud protection (38.3%).
Similarly, 70.8% of finance leaders want to increase ePayments. They are looking forward to time savings (77.2%), more timely payments (63.1%), cost savings (56.5%), and increased security/fraud protection (48.9%), among other benefits.
Yet, ironically, both parties believe the other is impeding adoption. Vendors say the number one obstacle to ePayment is that customers are not willing to give up checks (62.8%), while companies believe vendors are reluctant to accept ePayments (56.5%). To learn more about this blame game, download the full 2022 State of AP report.
How to Give Vendors What They Want
Although making vendors happy is a key concern amongst AP teams, it’s clear that many are unable to satisfy their needs using manual methods. World-class teams, however, are effectively addressing vendors’ issues and boosting relations through a combination of AP automation and managed services. Here are four best practices they are implementing to do so:
1. Automate, automate, automate.
There’s no question about it, AP automation enables accounts payable teams to do more with less by operating more efficiently, quickly, and accurately. With faster invoice security and visibility.
2. Use vendor portals.
Self-service portals alleviate vendor and AP frustration with inquiries by providing vendors with immediate access to information on the status of their invoices and payments. Vendors can also use payment portals to update their payment information, access virtual card payments for processing, and download detailed remittances, without ever having to talk with a member of the AP team. More time back for vendors and AP teams make vendor portals a major win-win.
3. Rely on managed services.
The second reason AP teams are not moving to ePayments as quickly as they would like is limited capacity to contact and enroll vendors. Managed services solve that issue by handling all the details of vendor relations in ePayments, including continuous vendor enrollment, onboarding, and handling inquiries in a timely manner to increase vendor satisfaction.
4. Adopt and expand ePayments.
Now that you know that vendors are receptive to ePayments, and you can turn to managed services to assume the burden of managing the time-consuming details, you can pay your vendors electronically. Not only will you gain greater control over your spend, while saving time and money, but your vendors can increase their cash flow through more timely payments, as well as gain process efficiencies. It’s a winning strategy all the way around.
With insight into what vendors want most, and the technology tools and services to help fulfill their needs, you can be an outstanding customer and strengthen critical vendor relations. Also, while you’re busy making your vendors happy, you’ll become happier too, thanks to the added efficiencies, visibility, and control. You’ll also be more resilient to weather today’s complex market conditions as well as any challenges you encounter on the horizon. Interested in learning more? Download the full 2022 State of AP report and start taking a strategic approach to your vendor relationships.