Do You Know the Answer to Three of Your Biggest Vendor Headaches?
Find out.February 2, 2012
by Mary Schaeffer
In an ideal world, the solution for your key suppliers with chronic problems will also make your accounts payable function run smoother. Enter electronic invoicing or e-invoicing.
There are three types of vendors who create a major share of the problems when it comes to payments:
Here’s a closer look at each group. In each segment, you’ll find tips on how to help your vendors move to electronic invoicing.
The Late Payment Complainers
Before engaging in an effort to fix this problem, make sure they are not being paid late and just complaining in an attempt to be paid early. Once you’ve crossed that hurdle, have a conversation with their billing department. If they are currently invoicing other customers electronically, they will readily agree to bill you in the same manner. You may want to alert purchasing about your strategy as they may have some suggestions or offer to make the call for you.
The problem arises if they are not currently e-invoicing customers. In this case you may be able to convince them to either e-mail you a PDF of the invoice or fax the invoice to your accounts payable department. While faxes used to be verbatim in a well-run accounts payable function, this is no longer the case. Many organizations use low-cost e-fax services to convert their faxes to e-mails eliminating paper.
There is a second issue you’ll need to address honestly. Are you paying the vendor late because of problems on your end? Are those problems in accounts payable or in another department? If this is the case you should be prepared for some potential push back from the vendor. Why should they adjust their processes because your organization isn’t doing as good a job as it should? Still, if they want to be paid on a timely basis, many will be willing to help out and will work to get you the invoice as quickly as possible. So don’t cross off these vendors from your list of prospects.
The Discrepant Invoice Producers
Everyone’s got them: Suppliers whose invoices are loaded with errors. And rarely are those errors in your favor. What’s worse is that these seem to be the same vendors that are first to complain when they don’t get paid on time. The important factor with these invoices is to get them as quickly as possible so you can begin fixing those errors.
Before you go down the e-invoicing route, you may want to ensure that the purchase orders your organization is providing is not causing part of the problem. Talk with purchasing to make sure they are completely filling out their POs. The purchasing executive associated with that account might have some insight as to why so many problems are occurring.
Once you are sure the problem is not on your end, contact the vendor to inquire about e-invoicing. If you have the ability to use one of the models with online dispute resolution, jump on it. It is probably the answer to this ongoing nightmare.
Assuming you don’t follow the steps above contacting the vendor and if that doesn’t work, then have them e-mail or fax the invoice. The sooner you get their information, the sooner you can identify the problems and fix them.
The Early Pay Discount Invoices
These present a real opportunity for accounts payable to make a bottom line difference to your organization. Vendors offering early pay discounts are few and far between so when you do find one, you want to make sure not to lose it. In fact, some organizations track early payment discounts lost each year. It is especially distressing if it is a large amount and the real cause is not with your company.
Figure out why the invoices are getting to accounts payable late. If you don’t have all invoices sent to accounts payable first, at least have the early pay discount vendors send their invoices to accounts payable first. Save the envelopes to track where the problem is. Are they being mailed late (which happens occasionally) or are they being delayed with the approver?
If the delay is in your firm, track it and compute the quarterly or annual cost. This is one way to get the attention of approvers who leave invoices on their desks for a week or two. If it is being mailed late contact the vendor. Occasionally the vendor is mailing late because they want to double check their invoices to make sure they are accurate. Other times, their reasons are not so honorable.
Regardless of the real reason, assume the vendor is above board and treat them as such. Again, contact them and ask for e-invoicing and if that is not possible, an e-mail or fax of the invoice. The important thing is to get that invoice as quickly as possible to make the early payment cutoff date. A number of suppliers are asking for repayment of that early pay discount from customers who paid after the discount date. Don’t let your organization be one of them.
Electronic invoicing makes invoice processing in accounts payable run much smoother. Take advantage of it, especially in those problematic situations in which you can improve vendor relations at the same time.
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Mary S. Schaeffer is the author of over a dozen business books including Controller & CFO’s Guide to Accounts Payable (John Wiley & Sons) and Fraud in Accounts Payable: How to Prevent It. She is the publisher of the CFO & Controllers Accounts Payable Management Journal and writes a monthly newsletter, a free weekly ezinee-AP News, speaks at accounts payable webinars, seminars and conferences and directs the organization’s consulting practice.