BPO Thought Process

BPO Thought Process

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10 Accounts Payable Tips for Organizations to Win Over their Suppliers

“If you can’t manage your suppliers, you can’t run your business”, goes the saying. From a Finance and Accounting standpoint, organizations often struggle to manage their suppliers particularly when they are unable to pay them on time and accurately.
 
The Accounts Payable (AP) process inevitably impacts the trust between an organization and its suppliers. Honoring the agreed-upon payment terms for paying bills on time and accurately builds trust with suppliers. Favorable relations with suppliers are critical because they not only bring in the goods and services for your business, but they can also provide valuable trade credit and even ideas for new methods and products. As such, the right partners can play an important role in improving the overall Supply Chain Cycle.
 
So how can we ensure that the “On Time Payment (OTP)” metric is constantly improving? It’s a question many of the clients I’ve worked with have asked, so I’ve put together a list of tips based on my experience in helping organizations improve supplier relations through AP efficiency and effectiveness:
 
  1. Improve EDI (Electronic Data Interface) / e-Invoicing – Technology-enabled accounts payable processes will significantly reduce delays and data entry errors through electronic or digital Invoices while minimizing paper invoices.
  2. Implement a “NO PO – NO PAY” policy – Though it may seem harsh initially, bringing in a greater volume of spend under PO Compliance has undeniable advantages. Through improved PO compliance you can ensure price advantage, query reduction, and accuracy in processing.
  3. Focus around Vendor Master Maintenance – A periodic vendor master cleansing activity helps improve the accuracy of vendor masters by removing duplicate vendors, avoiding one-time vendors and rationalizing duplicate and confusing payment terms .. When working with a BPO provider, any major changes in the financial data from the Vendor Master Setup should be pre-approved by the retained organization before reaching the outsourcing partner.
  4. Deploy real time analytics for improved decision making – Some of the key areas to proactively analyze include spend analytics, good receipt and invoice reconciliations (GRIR), discounts earned / lost, late payment interests/penalties, delays in receiving invoices, delays in receiving approvals, end-to-end capture of cycle time.
  5. Define a structured query resolution process – One of the biggest hurdles in ensuring on-time payment is the lack of a well-governed query or dispute management process. Robust governance backed by up-to-date process documentation will ensure sufficient communication and accountability between the units on actions needed to clear invoices so that queries are effectively responded to and by the right person.
  6. Improve coordination between AP and Sourcing – Many times, particularly in an outsourcing environment, we see a communication or co-ordination gap between the AP and Sourcing functions. As with data driven-insights, when both the AP and sourcing teams work together to mitigate gaps, they are better able to improve overall supplier performance.
  7. Enhance invoice processing accuracy –This is best done by avoiding duplicate or erroneous payments, adhering to financial controls, and implementing a Right at First Time (RFT) approach while focusing on CTQ’s (Critical to Quality fields) and high value invoices.
  8. Know your suppliers - It’s important to have categorization between “Urgent”, “Statutory”, “Utility”, and “Normal” suppliers. By prioritizing suppliers who have late payment penalties and/or early payment discounts associated with their payment terms, an organization can pay such priority suppliers on or before the due date which will result in improved cash flow and goodwill.
  9. Routine update of coding instructions – For any non-PO invoices, a pro-active approach to have a tracker containing coding information based on historical data will help minimize the number of queries and errors while processing.
  10. Follow up - One of the more difficult but critical tasks is following up and communicating effectively. Developing an automated reminder system to follow-up on pending invoices between internal and external teams will ensure timely resolution on queries.
These are a few basic and simple, yet very effective tips that I regularly apply and recommend to help organizations better manage their AP function more effectively and efficiently. I welcome additional suggestions to add to this list.

About the author

Atul Sinkar
15 Comments Leave a comment
Very useful article..
Atul Very nice and simple steps covers almost all the TO DO´s in AP before payments. Cheers!!
Pretty helpful guidelines. Thanks for emphasizing these basics in the simplest manner.
Wow Atul.. Gr8 write up.. Keep it up!!
Very useful article..
Very informative article in a simple language. Good write up!!!
Very well written in a simple, straightforward and easy to follow manner.
Very well written in a simple, straightforward and easy to follow manner.
asinkar's picture
Thanks everyone for your comments.
A well thought provoking and meaningful, 10 Accounts Payable Tips explained in a very simple and easy way for the Organizations to Win Over their Suppliers
Very usefull write up...easy to follow up
Pretty useful write up. You have exactly emphasize on the basic rule of Accounts payable which should be religiously followed by organizations to build rapport with their Suppliers.
Very usefull information thanks, can you please explain how to overcome from the duplicates, what are controls we need to take before proceeding to payment. Its realy greatful if u provide the solution for this. Thanks in advance...
A very Nicely presented simple steps to control AP.
Great information!! Thx for sharing.

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