Vendor relationships are everything.

They’re the cornerstone of a reputable business, not to mention a fully automated one. Gartner recently indicated that “relationships with vendors are increasingly key to business performance.” 

They’re also key to reduced spending through an unexpected department: accounts payable (AP).

One of the biggest problems plaguing an AP team is the duality of its representatives to act as both customer—who relies on the vendor for goods or services critical to its business—and also the payables gatekeeper. 

Gartner also noted that data is a key component to analyzing existing vendor relationships and understanding how to leverage them for a positive experience while reducing company spend.

So how does having access to AP data positively impact these crucial relationships? In this post, we’ll take a look at four different ways an AP team can help its enterprise get the most out of vendor relationships.

Four ways AP can optimize to improve vendor relationships

AP is on the front lines of vendor management, but all their activities depend on communication and payment reputation. Here are the ways you can improve your standing with vendors and, ultimately, reduce company spend in the long run.

1. Timely payment of invoices

What’s better than making a sale? Getting paid on time.

Apart from your continued business, that’s what your vendors want most of all. But AP teams that still operate through manual procedures run the greatest risk of failing to pay on time.

Often they face delays with simple invoice entry. That leads to a domino effect that delays processing, coding, approvals, and ultimately, payment.

A delay with manual processing gets exacerbated when other internal or external delays occur, such as staff changes, conversions of internal systems, mergers and acquisitions, or even natural and man-made disasters.

On the other hand, an automated AP team will have a smoother time tracking deadlines. Smart technology that utilizes OCR and AI can not only pull the data as invoices come in but can also automatically code, tag, validate, and send the invoice through the approvals process (for both PO and non-PO invoices)—allowing the vendor to receive timely payment. Plus, automation takes more of the burden off the AP team and facilitates remote work. That means the process runs smoothly whether they’re in the office or working from home. 

2. Managing consistent, transparent communication

Like timely payments, consistent, transparent communication is pivotal. It’s one of the essential best practices we regularly discuss.

It builds relationships and keeps cooler heads on both ends of the conversation. No other team feels this as much as AP, who constantly endure interrupted days because of vendor phone calls.

Vendors often call asking for payment status updates, or worse, notification of late payment. As indicated in the section above—continuous late payments for manually operating teams translate to poor vendor relationships. In addition to the significant cost incurred by manual AP, manually operating teams can’t get more efficient when they’re constantly interrupted to field calls and track down invoices.

Alternatively, automated teams have a handle on these challenges. Smart systems are more likely to have a vendor interface—a portal in which the vendor can submit electronic invoices and check on payment status. 

Plus, features like an internal intelligent, automated approval and verification process can assist with due diligence and help the vendor receive payment faster without bogging down your AP team with a rush of inquiries.

3. Analyze vendor business relationships

Just as your vendor would measure, review, and analyze the cost of being in business with your organization, so should you consider what a vendor relationship means holistically.

 Once again, data collection is key for this necessary activity.

Touched on in our previous article on improving monthly closeouts,  automated AP processes can provide real-time data and quantify key analytics that ultimately become part of the vendor scorecard.

Solid systems can use features such as dashboards to track tactical data and measure a strategic vendor’s performance over time.

With vendor data at your fingertips like invoice receipt and accuracy, delivery against the invoice, and order errors such as shortage or overage, you can easily review and analyze vendor impact and, in combination with procurement, help the enterprise make better decisions for the future.

4. Negotiating early payment discounts

Perhaps one of the most overlooked strategies to reduce company spend, many organizations miss out on one of the easiest ways to save money—early payment discounts.

But AP that’s already failed to get a handle on invoices will have a hard time negotiating for a discount.

Early payment discounts (also referred to as cash discounts or prompt payments) are a method of trade finance where vendors offer their buyers a discount on outstanding invoices as an incentive to pay early.

An AP team that still relies on manual processes will have a harder time capitalizing on this opportunity because of an increased likelihood of delayed payment and an inability to easily review which invoices might be up for payment ahead of terms.

Automated AP teams, once again, have an advantage with real-time cash flow and outstanding liabilities insight. In addition to visibility of invoice status with a smart software solution, negotiating for discounts with early payments is significantly easier.

AP teams can also work with different types of discounts thanks to readily available information for the different requirements—an obstacle for manual teams that, yet again, have to scavenge for information.

Set your vendor relationships up for success

Data and technology are pivotal to positive vendor relationships and relieving pressure on your AP team. Seamless data collection, automatic analysis, and visibility put your organization in the best position to create a positive reputation with vendors and decrease your spending in the long run.

A solid AP automation solution makes the difference for your vendors, your AP team, and your enterprise at large.

It’s the simple things that make a difference for your company. Based on one of our most popular blog posts, Ascend’s AP Boosting Best Practices series examines implementable improvements that lead to AP efficiency, so you can make timely, clear, and confident financial decisions. 

Next, we’ll discuss the advantages of automating your process to improve internal controls and catching liabilities before they negatively impact your company. Read here.