The Story Of The Unhappy Vendor And The Professional Client

I met a highly respected and progressive organization last week that was trying to get over a vendor relationship problem. Some of their vendors were unhappy in spite of the company placing a lot of importance on their vendor relationships, treating them as partners, and investing in training their Accounts Payable teams on interpersonal skills and sensitizing them to the importance of collaborative relationships.

In their recent feedback meetings, five of their vendors said that they were not happy. The cause of dissatisfaction was frequent delay in their payments inspite of the company being given the best rates and service levels.

So the A/P team analyzed the data and was surprised to find that there were delays indeed. Over the past 3 months, they had paid invoices to these 5 vendors, with an average turnaround time (TAT) of 15 days beyond the agreed credit period. They investigated further into the causes of these delays and this is what they discovered.

A year ago, the A/P team had projected that the invoice volumes would go up to the current volume, and asked for an A/P automation or a Procure-to-Pay software system. They knew that such a system would ensure that invoices are processed efficiently, and on time. The decision to implement the software took time, and for various reasons, it was decided not to go for any software.

So A/P made a request to augment their team size, but that too, was not approved of by the CEO, due to budgetary pressures. As a result, the old practices in the payment processing continued, while the company attempted to use relationship management and soft skills to smooth things over.

The old practices and processes however perpetuated the delays and lack of process visibility.

Suppliers continued to give their invoices to their respective user-department owners (namely, IT, Marketing, HR, etc), who would be busy, lose the invoices, or forget to forward them to A/P in time.

Some invoices got forwarded to A/P without the right approvals from the heads of depts. A/P had to check the rules of the ‘D of A’ to know whether the right approvers had approved or not. Often it was discovered that a key person had skipped the approval process, and the invoice had to be sent back for approval, this again resulting in loss of precious days.

It was discovered that for 4-5 of the invoices, it had so happened that A/P noticed that the projects team had not attached the sign off report indicating that the services had been successfully delivered. Since it had already been a few weeks, they were unable to find the sign off documents, and that again had delayed the whole process.

For one vendor they discovered that the Rate Contract had expired a month earlier, and no one had remembered to renew it on time. Hence 3 invoices had got stuck. By the time they got the rate contract approved again, they had lost 2 weeks.

The A/P head also realized that a few invoices had got stuck since the person processing them fell ill, was on leave for a few days, and there was no one who had visibility to those invoices.Hence there was no progress till he returned to work.

Since in many cases, the A/P team did not know the statuses of approvals from user-department heads, they did not inform the suppliers proactively, and neither did the department heads. So the suppliers were unaware of how their invoices were moving along the cycle towards payment.

It was also discovered that for one of the vendors, two advances were given earlier, and in the previous invoice the advance settlement was overlooked, and hence, not adjusted. The advance now needed to be adjusted in this invoice, and that took longer, since it required pulling out earlier information.

All in all, the A/P team felt that they were completely overworked, very dependent on the skills and knowledge of a few key people, and that department heads were being lax about timely approvals, and at the end of all of this, suppliers were not happy.

We demonstrated our Expenzing Invoice Manager solution to the CFO and Finance team at the above organization. They realized that the first decision not to automate was costly and will soon have our Procure-to-Pay software implemented. Their decision was based on the system capabilities to streamline the entire process of receiving the supplier invoices, online authorizations as per ‘D of A’, back and forth recorded trails of questions across departments, skillful due diligence and even automated due diligence. And to top it all, smooth MIS and Accounting.

How does Expenzing Invoice Manage do this? It’s an online cloud based software solution, wherein all department heads and A/P team members log on to the same platform, interact, approve, and get work done. Your suppliers respect the transparent process, and finally, the invoices are not only paid on time, but are also scrutinized properly to eliminate mistakes. Auditors are happy because important info is recorded for their reference.

If you found this post useful, and would like to sign up for using our A/P automation solutions, or to see a demo of our Supplier management or Procure-to-Pay solutions, contact us now. Click here to ask for a demo.