Proper supply management is essential to the success of many large businesses. Part of the supply management process involves taking the time to carefully screen suppliers to meet client demands for on-time deliveries and competitive rates. It also involves, according to a recent article in Global Trade, suppliers offering a streamlined invoice-to-cash process that reduces or eliminates unnecessary manual processes for the customer.
According to Global Trade, understanding a supplier’s accounts receivable processes is important to buyers, as the way in which a supplier submits its invoices has a direct impact on the buying organization. While many buyers have implemented technologies to streamline processes to pay suppliers more efficiently, many of these same suppliers are not jumping on the same wagon. Basically, suppliers want the advantages of automated and electronic invoicing and payment but are still resistant to putting paper to bed.
In fact, according to a study cited in the Global Trade article, 2017 Perceptions Study – Analysis of Invoice-to-Cash Practices and Preferences of Supplier Organizations, of the nearly 500 supplier organizations surveyed on what methods they use to submit invoices to their customers, most (78%) indicate they submit invoices via email while 76% submit via paper. Thirty-eight percent use electronic methods such as electronic data interchange (EDI) or third-party e-invoicing networks (24%).
The survey also shows a real disconnect among suppliers’ responses. Nearly all respondents (90%) indicated that getting paid faster was the most important thing, 80% said getting the invoice delivered faster was important, and 78% said confirming the customer receipt of invoice was important. While suppliers want the benefits provided by automation, most of them still use methods that do not facilitate those benefits.
Additionally, when asked how suppliers are currently paid and how they prefer to be paid, the majority (87%) indicated that they currently receive payment via paper checks while 72% indicate they receive payment via Automated Clearing House (ACH). However, only 26% indicated they prefer payment via paper check and 59% had a preference for ACH.
The survey found that suppliers are still using paper checks for a number of reasons: “It’s how we’ve always done it,” because of their old-fashioned values, they have a bank courier, and checks are easier to handle. Those suppliers that prefer ACH payment, according to the survey, say: “because payments clear quickly and it’s affordable; it’s easier and faster; funds are available more quickly; it’s more efficient from a cash flow perspective; and there is less chance of errant or lost payments and a better record of remits.”
How does a buying organization get suppliers to move toward electronic and automated methods of invoicing and payment? Understand why a disconnect exists in the first – the comfort level old methodologies provide – and then take a comprehensive, layered approach to transition suppliers to newer technologies and more streamlined processes. For example, in lieu of asking suppliers to transition to newer processes within a three-to-six month window with a single, one-size-fits-all approach, identify three to five phases for bringing those suppliers along. As the article reinforces, “if buying organizations take a comprehensive approach and slowly bring those suppliers into the 21st century, their organizations will ultimately reap the benefits of streamlined processes, greater efficiency and healthier cash flow.”
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Roanoke Underwriting serves the commercial marine insurance and customs bond needs of agents and brokers throughout North America working with supply chain risks and logistics service providers. For more information about our products, please contact us at 1.855.213.4545.