AP automation offers huge benefits to organizations of almost any size – greater visibility and control of costs, important time-savings and operational efficiencies for finance teams and line of business, reduced risk of fraud, valuable rebates from virtual card payments, and better cash flow management.
Despite all these advantages, there are still two primary obstacles that most often stand in the way: one, integration of existing enterprise finance systems with multiple electronic payment types (e.g., ACH, virtual card, FX); and two, getting suppliers signed up and onboarded to accept electronic payments. There has been plenty written on the former – and a handful of AP automation solution providers have solved the integration problem – but the supplier enablement issue is a little trickier.
In a recent survey of 669 finance professionals conducted by MineralTree, respondents reported a strong increase in their organizations’ use of digital payment methods and their intent to make even more digital payments in 2022. But, the same survey also found that the top barrier to converting more spend to digital payment methods is supplier willingness to accept them, cited by 51% of respondents, followed by team capacity to contact and enroll vendors (31%).
Given the survey panel was finance professionals–not suppliers themselves–the first obstacle may be more myth than reality, as many suppliers preferred digital payments during the pandemic to eliminate challenges with collecting and processing checks and get paid faster. While the second obstacle remains a very real challenge for finance teams, the good news is that some AP automation platforms include supplier enablement services to onboard suppliers to accept digital payments. Without any of the effort or hassle, you can maximize cost savings, security, and cash rebates from digital payments, while freeing up resources to focus on other strategic initiatives.
Suppliers drive the importance of AP automation as much as internal operations
The pandemic and remote work put a harsh spotlight on the importance of digitizing back-office functions like AP. In fact, in that same research study by MineralTree, finance professionals point to AP as their number one back-office digitization priority. There are a lot of internal efficiency and operational challenges that reinforce the need to automate AP, but supplier relationships are also a big driver.
The COVID-19 pandemic underscored how critical suppliers are to a business, providing the goods and services needed to continue servicing customers and running operations smoothly. As a result, maintaining strong supplier relationships has become more important than ever.
In the research study, 58% of finance professionals interviewed said their supplier relationships were more strategically important than a year ago. The number is even higher for healthcare organizations (73%) where the steady flow of supplies is critical to delivering care. Not surprisingly, organizations that made more payments also viewed supplier relationships more strategically (74%), a sign that suppliers are essential to their continued growth. This growing importance of suppliers is likely to continue as organizations focus on moving their businesses forward and preventing future supply chain vulnerability.
Getting suppliers onboard
Supplier enablement requires effective planning, management, and execution. As you consider AP automation solutions, look for providers that can help you do the following:
- Evaluate the last 12-18 months of invoice spend and volume to identify the suppliers that drive the most activity. The greater the dollar volume and number of invoices, the more there is to gain from AP automation for both you and your suppliers.
- Educate those suppliers on why accepting electronic payments such as virtual cards is beneficial to them – faster receipt of payments, detailed remittance, reduced manual effort reconciling receivables, and reduced risk of fraud – and work with them to address any questions or concerns they might have.
- While it is advantageous to convert as much spend to digital as possible, you have to balance that with supplier preferences. Vendors are concerned about a lot more than whether or not to accept a virtual card for payments. They also want to know that any existing contracts or agreements on payment types or terms will be honored. Your solution provider’s ability to address these questions up front will help ease their concerns.
- Be collaborative. Some providers can be very aggressive and force suppliers into accepting specific electronic payment methods. This can turn suppliers off and make them less likely to work with you when you need them most.
On top of supplier enrollment, the right AP automation solution provider can take other things off your plate: managing vendor payment details, responding to day-to-day supplier inquiries about payment status and the like, and addressing payment issues.
Adopting a continuous improvement mentality
Many AP solution providers do a “one-and-done” enrollment campaign at the onset of the relationship. For companies that regularly add new suppliers (e.g., biotech in R&D mode) this leaves a lot of payment volume on the table. Real success requires continuous enrollment where new vendors are flagged when an invoice appears for the first time. In most cases, your provider can enroll them before that first invoice is paid, ensuring that you maximize adoption of electronic payments and all the benefits that come with them.
Both you and your suppliers stand to gain a lot from AP automation, no matter where you are starting – greater visibility and control of costs, time-savings and operational efficiencies, reduced risk of fraud, and better cash flow management. The more you can digitize, the more value there is to be gained. If you are already paying some suppliers digitally, set specific goals for signing up and onboarding more based on specific criteria for which suppliers would benefit the most. Do the same with the number of virtual card payments in your mix to maximize your rebates. Even if you’ve adopted an end-to-end platform, don’t stop there. There is always opportunity to gain greater value and ROI through continuous improvement.