Vendors are essential partners in any business, providing goods and services critical to meeting customer needs and maintaining competitiveness. Therefore, maintaining effective accounts payable vendor management is a top priority for businesses. However, the process vendor management can be a daunting task, especially when it comes to vendor onboarding, communications, and payments. This is where accounts payable (AP) automation comes in to provide a better experience for businesses and vendors.

4 Key Accounts Payable Vendor Management Challenges:

In accounts payable vendor relationship, businesses face several key vendor management challenges. Some of the most common ones include:

1. Vendor onboarding:

Onboarding new vendors can be time-consuming and requires collecting and verifying various documents, such as tax forms and banking information. Vendors may need to provide several documents and information before an invoice can be paid. In addition, specific industries require valid copies of tax and legal documents. However, communicating with vendors and gathering papers can take time and effort.

Modern Vendor management tools like Zycus Supplier Network vastly improve your ability to onboard vendors and collect data in one central location.

Read our blog on: Vendor Onboarding Best Practices And Technology Tips

2. Invoice discrepancies:

It’s no secret that AP organizations have long struggled with inefficiencies, primarily due to manual, paper-based processes and software that has become outdated. As a result, AP vendor management teams continue to face high invoice processing costs and long cycle times. One of the critical steps in the AP process is to match the invoices again for purchase orders (PO) and Purchase receipts (PR). If the process is manual, it can be challenging, especially when dealing with a high volume of invoices. Additionally, manual 3-way matching is susceptible to human errors, such as incorrect data entry, misinterpretation of information, and missed matches.

Unfortunately, this gives them little room to deliver value to the business even if they want to.

Here are some average AP vendor management benchmarks without automation as per Ardent Partners:

• It requires ten days to process a single invoice
• Almost 25% of the invoices are flagged for exceptions

All this leads to delayed payments, duplicate work, reputational loss, and strained vendor relationships.

Today, AP automation software has been fast evolving with the latest advances in AI, Machine learning (ML), and cloud computing. For example, invoices sent in any format are scanned and digitized with AI-enabled OCR technology. Powerful AI tools enable automatic routing and reconciliation of invoices. The AI performs two-way or three-way matches of invoices and optimizes the workflow. In addition, the software seamlessly integrates with all significant enterprise resource planning (ERP) systems.

AI and ML also give self-learning capabilities to the AP automation software. So as the software learns more tasks, it gets better at accomplishing them over time.

Know more about Three-way Invoice matching

3. Communication Issues:

With increasing volumes of invoices and supplier queries, the AP team can often get bogged down with the manual processing of invoice-containing emails, leading to additional costs, missed replies, and slower response times.

Vendors need cash inflows, and timely invoice payment is a priority. Unfortunately, the current communication process with vendors often creates bottlenecks, frustration, and payment delays. In addition, the emails often get lost, unread, or need the correct invoice attachment.

Vendors do not have a system to confirm that Superior received an invoice. Therefore, the vendor must email or call to check the payment status if an invoice is outstanding after the due date.

Communication is more difficult with multiple invoices outstanding, mainly if the dollar amounts are similar. Zycus AP Smart Desk solves these problems by automating invoicing email processing, enabling the AP team to focus on more strategic tasks, such as financial analysis and forecasting. Zycus AP Smart Desk is an AI-powered tool that automates email processing for the AP team. The tool uses natural language processing (NLP) and machine learning (ML) algorithms to identify the type of email and extract relevant data, such as invoice information or query content. The AP Smart Desk then auto-replies to query emails and creates invoices for invoice processing emails, freeing up valuable resources for the AP team.

4. Payment delays:

Payment delays can occur for various reasons, such as inaccurate invoices, lack of approval, or internal processing issues.

The easiest way to improve supplier relationships is to make timely or early payments. Paying on time elevates your credibility. Being honest with vendors can help build solid collaborations based on trust and mutual respect. More importantly, you can avail the early discounts for timely payments.

Read our blog on: Vendor Relationship Management: A Comprehensive Guide

It is estimated that 92% of businesses pay suppliers late. The biggest reason given by finance decision-makers for late payment was that their AP processes hamper their ability to pay online. From an operational viewpoint, solutions like AP automation can make this process efficient and more accessible to validate and approve invoices promptly. Fast approval of invoices puts organizations in a better position to offer an early payment program to its suppliers. This can be highly beneficial for both the suppliers and buyers as it makes a highly collaborative way to strengthen the supply chain.

Timely payment via AP automation increases a buyer’s credibility. With your supplier’s trust, you can quickly negotiate costs in exchange for longer-term contracts and perhaps even gain discounts. In addition, automating AP vendor relationship management can help accelerate processing time, offer higher accuracy, improve efficiency, and optimize overall payment cycles. As a result, businesses can avoid penalties and see an improvement in cash flow.

Download our whitepaper- 6 Attributes of a Best-in-Class Accounts Payable Operation

Conclusion

Effective vendor management in accounts payable is critical to the success of any business. Businesses must overcome various challenges, such as invoice discrepancies and payment delays, to maintain strong vendor relationships and ensure smooth operations.

AP automation solutions can help businesses overcome these challenges by streamlining processes, improving efficiency, and providing real-time visibility into accounts payable activities. The software can also enhance vendor experiences by providing them with access to a self-service portal to review invoices and payment details and ask questions. For effective vendor relationship management, book a demo with us today.

Related Read:

1. Blog – Vendor Landscape: Supplier Risk And Performance Management
2. Blog – What Procure to Pay (P2P) Transformation Vendors Don’t Tell You?
3. Blog – Transforming AP: Collaboration Connects Accounts Payable to Strategic Business Processes
4. Al-powered Vendor Invoice Management System
5. Blog – Effectively Managing Vendor Relationships with AP Automation
6. Research Report – Forrester’s Overview Of 30 CLM Vendors – Now Tech: Contract Lifecycle Management
7. White Paper- E-invoicing Maturity Model for Accounts Payable Process Improvement
8. Solution- Accounts Payable Automation Software
9. Solution- Accounts Payable Automation Software for AP Leaders
10. Solution- Accounts Payable Automation for Touchless Invoice Processing