Accounts Payable is one of the few areas within a business that relies on third parties to adopt and use its solutions. In this regard, it is important for AP to have good engagement with its suppliers. The speed of business is much faster today, and generally requires a high level of engagement and alignment with suppliers. Within some industries, enterprises view supplier negotiations as a net-sum game and try to squeeze the lowest price out of suppliers. But more and more, suppliers are in much higher demand, and buying organizations must function in a more fully integrated manner. Buyers must remain attractive to suppliers to assure supply is steady when the demand is high for suppliers’ services. For AP to be successful, it has to be well engaged and capable of dealing with suppliers.
Supplier Management Strategy
The contemporary AP function is dynamic in nature and can support operations and impact performance in a variety of ways. This breadth of responsibility has been an unheralded aspect of just how valuable the AP department can be in relation to greater financial management objectives. As shown in Ardent’s 2018 State of ePayables market research report, 40% of AP teams currently manage/support the enterprise’s supplier relationships. This is higher than in year’s past but shows there is still room for AP teams to take on more responsibility in this area. Supplier relationships can be directly linked to AP processes and should be an accessible and prominent area for AP to pursue in order to reach a more valuable, and more strategic level within the enterprise.
For any supplier management strategy to run effectively, an AP team must rely on data. This mainly includes supplier information, supplier performance, supplier quality, and supplier risk data. In all its forms, supplier data is a critical element to understanding how they are performing against agreements and contract terms and also the impact of these vendors on enterprise spend. While procurement teams have long been in charge of supplier management, AP teams should be able to harness the data from invoices and POs and deliver intelligence to the procurement team to help undertake and augment this supplier management strategy. Building and sustaining relationships with suppliers will help AP to make a larger impact on enterprise operations and overall performance. Areas in which AP can leverage data available to them and deliver business insights include:
- Managing real-time supplier inquires and requests to help build a stronger relationship with the procurement function.
- Taking ownership of a master vendor file to boost cross-functional supplier information management efforts.
- Taking an active role in sourcing by transferring, analyzing, and delivering key supplier information to the procurement and the sourcing teams.
Conclusion
In a highly competitive marketplace, enterprises do not want to be the high cost, problematic customer, so being responsive and working through payment issues and not having key suppliers struggle with the invoice process is a long-term benefit to a business. Suppliers should be viewed as a source of knowledge that can be leveraged for a competitive advantage and mutual gain. Accounts Payable teams must work to build stronger relationships with their suppliers for them to make a larger impact on enterprise operations and overall performance. The speed at which business moves today requires a different level of engagement and alignment with trading partners than ever before. Executing with precision and looking to take on more responsibility in the area of supplier management allows the modern AP team to become a much more strategic and value-added part of the organization.
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