AP automation AI and ML
Accounts Payable

How AP Automation Makes Or Breaks Vendor Relationships

Strong vendor and supplier relationships are among businesses’ most valuable assets. Solid partnerships can make all the strategic difference, helping companies offer needed services, improve in-house operations and expand into new markets. Turbulent ones can have the opposite effect, however, hindering firms’ potential and preventing them from achieving their goals or adequately serving customers.

Developing profitable long-term business ties begins with onboarding, which requires lengthy vendor research, analyses of their leadership, products or services and projections of how such factors might help a company or its clients grow.

These processes takes significant amounts of time, labor and operational resources when handled manually, however. Teams must examine numerous supplier details to weigh how these attributes will affect their operations, yet they are unlikely to understand all facets of the potential business arrangement.

Supplier onboarding guided by automated and dynamic accounts payable (AP) procurement processes can have different results. PYMNTS’ Payables Friction Playbook found that 64 percent of AP leaders believe greater data access and financial intelligence will boost their strategic capabilities and improve their operational insights. Such benefits can include understanding their own cash flows and management issues as well as those of their potential partners.

The following Deep Dive explains how automation can improve supplier onboarding processes, strengthen company-vendor relationships and boost all parties’ profitability.

Automating onboarding

Onboarding requires collecting as much information as possible on potential vendors or suppliers, including their credit histories, past performances and even ownership structures. Each detail affects partners’ abilities to contribute to business relationships, which means up-to-date information is crucial to making informed decisions.

Such scrutinization goes beyond simple checks of potential suppliers’ annual earnings or debt levels, however. Companies must leverage know your customer (KYC) anti-fraud checks to ensure the entities in question are not associated with fraud, money laundering or terrorism financing, among other nefarious acts. Firms must also verify that prospective partners comply with mandatory local, regional, national and international regulations.

Fifty-eight percent of business leaders believe enhanced data insights can help their organizations comply with regulations and identify areas of concern. Performing such deep background checks can be challenging for firms with limited resources, though. A grand majority — 96 percent — of U.S. employers report completing at least one type of criminal background check, which can cost $20 to $100 per person. Such checks on companies are much costlier, and these expenses grow as more suppliers are onboarded. Some large firms even report working with more than 100,000 suppliers at a time.

Organizations cannot afford to skip this step, however, and collecting data on potential suppliers can be slow and rife with legacy processes. This is especially true for firms that silo information in disparate systems across the enterprise, causing potentially important details to slip through the cracks. Such practices affect other processes, too, including vendor payments, invoice management and procurement efforts, and all can lead to poor company-vendor bonds.

Automated AP solutions can put all these details into place, giving companies the information they seek in a fraction of the time manual processes require. Artificial intelligence (AI)- or machine learning (ML)-powered automation takes it a step further, sifting through large quantities of data and helping companies find the best partners.

Building Better Business Bonds

Manual processes affect companies greatly, especially as more businesses embrace digital methods. PYMNTS’ Payables Friction Playbook reported that nearly 90 percent of surveyed AP departments still use paper checks to pay suppliers, for example, and another survey found that 24 percent of AP professionals are aware that manual processes can damage supplier relationships.

AP teams appear to be more in step with the digital times when it comes to onboarding, however. PYMNTS’ research found that 63.4 percent use digital methods to onboard suppliers, while 49.5 percent use manual methods. It also revealed that 72.1 percent use digital means to collect credit information on suppliers, but 67.7 percent still prefer to negotiate contract terms with onboarding suppliers through manual methods.

Automation also facilitates interdepartmental communication, making documents and data available in real time to those who need them. Analysts argue that having vendor portals in which master data is centralized with invoicing, order and payment history may further streamline operations, especially when such portals are enhanced with AI or ML technology and connected to organizations’ AP and AR software. These links will ensure companies can make timely payments to vendors in their preferred methods.

Making AP automation key in supplier management will thus pay dividends, providing streamlined operations, greater control over cash flows and deeper knowledge of partners’ activities.

Boosting Bottom Lines

Companies that fail to focus on AP automation are missing opportunities to optimize their returns, according to industry analysts. Automated AP payment can ensure bills are paid on time, which could be their greatest single contribution to fostering strong business ties.

Timely payments boost firms’ credibility with partners, keep collaborations solid and enable businesses to better negotiate discounts on services or products. This in turn allows them to better manage cash flows and could even earn them discounts for early payments. Recent research found that only 33 percent of organizations were able to receive early payment discounts, however, and that 16 percent never secured them. Other research shows that just 5 percent of businesses always pay their bills on time. These companies appear to pay late for numerous reasons, but implementing automation could alleviate some of the many potential issues.

Vetting new suppliers can be time-consuming, and analysts note that strategically important partners often require even more governance. Businesses that use AP automation to reduce fraud and friction and pay their suppliers on time are doing more than helping their bottom lines — they are building their reputations as reliable corporate partners with suppliers and beyond.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.