Use AP automation for better vendor relationship management

Your business success depends on healthy vendor relationships.

Good vendors provide the materials and services needed to run your business, help you solve problems, share innovations, and help you reduce costs. Investing in building positive, trusting relationships with your vendors is a critical aspect of maintaining a robust supply chain that caters to your business needs. 

A solid vendor relationship management strategy lays the foundation for establishing and maintaining healthy working relationships with vendors. Effective supplier management involves selecting the most suitable vendors, developing long-term relationships, continuously monitoring vendor performance, and mitigating supply chain disruptions. By mastering vendor management, you can make it easy for your business to reap the benefits of good vendor management.

Read on to learn about the benefits of efficient vendor relationship management and strategies for vendor relationships using accounts payable automation. 

Why vendor relationship management is important

The vendor relationship management process involves setting up systems and processes to improve communications, control costs, and mitigate risks to build stronger relationships. Good vendor relationship management helps your business gain value by achieving mutually beneficial business outcomes with vendors.

Managing vendor relationships can result in numerous benefits for businesses, such as increased product consistency and revenue. Here are some of the other key benefits:

• Increased trust: Building stronger bonds with vendors solidifies business partnerships, enables innovation and information sharing, and can result in more favorable pricing and business terms.
• Better communications: Healthy relationships are built on communication. Good communication means partners can manage disputes, collaborate on projects, and manage disruptions effectively.
• Lower costs: Strong vendor relationships help your business gain favorable pricing and terms, improve delivery times, and reduce indirect costs such as holding and reworking.
• Improved company reputation: A dedication to building ethical and healthy business relationships improves both partners’ reputations – and cultivates positive business connections.
• Increased efficiency: You can trust reliable suppliers to deliver on time, improving overall efficiency and reducing administrative costs.

Accounts Payable vendor management

Realizing these benefits requires effective relationship management with vendors – often not an easy task. One of the most effective ways to maintain positive supplier relationships is by improving accounts payable workflows, especially those that directly impact vendors. 

Vendor management for accounts payable includes processes for invoicing, payment, and procurement from vendors, including:

• Processing vendor invoices: Receiving, coding, verifying, and approving invoices from suppliers.
• Paying current vendors: Issuing invoice payments and credits to suppliers.
• Onboarding new vendors: Assisting the procurement department by adding new vendors to internal accounting systems or ERPs.
• Managing vendor documentation: Gathering, digitizing, organizing, and storing invoices, contracts, certificates, and other documents.
• Dispute resolution: Answering vendors’ questions and resolving invoice errors and payment disputes.

An effective vendor management process relies on AP teams performing these tasks well. This involves streamlining workflows, utilizing systems, and integrating technologies to build collaboration with suppliers.

Best practices for effective vendor relationship management

Whether you are developing a vendor management process or have one already in place that could use some improvements, following these best practices can help ensure its success. Since every company has its unique approach to vendor relationship management, consider how you can adapt these strategies to your specific operations.

Manage supply chain risks

Partnering with a supplier always involves a degree of risk. A good contract offers a degree of protection, but there will always be uncertainties in the supply chain. Unexpected events like price fluctuations or supply disruptions can increase your risks. 

Having a positive relationship is essential to vendor risk management. When a challenge arises, you can work together to fix the problem. Analytical tools are also a key asset. An accounts automation platform with real-time reporting and analytics can help your AP team perform risk assessments on new and current vendors and build contingency plans to mitigate risk.

Streamline vendor onboarding

Finding reliable, strategic vendors who supply high-quality goods and services at fair prices is crucial. The best vendors see the supplier relationship as an investment and partner with you to help you grow your business. 

In AP Today: Bottlenecks, Benchmarks, and Best Practices, Stampli found that 31% of companies have at least 500 unique vendor relationships. This highlights the need for streamlined and efficient vendor onboarding processes that simplify the often-complex task of selecting and adding vendors. 

Automating the process is an effective way to streamline onboarding. For example, the vendor management system can automatically send an information form to a new vendor. Once the vendor returns the form, the system checks the form for completeness and then automatically creates a new vendor record.

Set clear expectations

It’s important to ensure that you and your supplier know each others’ expectations about the business relationship. Good vendors want to meet customer expectations. For example, if your vendor wants Net 30 payment terms, but your company offers Net 60, it’s important to agree on acceptable terms before doing business with each other to avoid misunderstandings later on. 

Improve communication with vendors

Much about accounts payable vendor management comes down to communication. Vendors want to know the status of their payments. AP teams want a quick resolution to any errors and disputes with vendors.

AP teams interact with individual vendors and internal stakeholders like Procurement, Receiving, and Sales and Marketing. Review your current controls and processes to simplify communications and make it easier to share information across teams and organizations. 

Many AP automation solutions feature an integrated vendor portal where vendors and AP teams can communicate. Vendors can log in and check their invoice status or ask questions, and AP staff can ask vendors about erroneous invoices and discuss and resolve disputes. 

The automation platform also logs every communication, enforcing due diligence, ensuring a complete AP audit trail, and preventing miscommunication.

Track KPIs and AP metrics for vendor performance management

Use a detailed system to measure and evaluate your vendors’ performance and your own. Ensure you provide timely positive and negative feedback to your vendors throughout the relationship to keep them informed. AP automation solutions with integrated AP reporting and dashboards provide continuous monitoring of key performance indicators (KPIs) such as invoice lifecycles, error rates, late payments, and disputes.

Keep a scorecard and discuss these KPIs with your vendors to track their performance. The scorecard can also come in handy to identify areas for improvement when you’re discussing contract renewals with vendors.

Consider mutual benefits

When you enter into an agreement with a vendor, you share the risks and rewards. Consider your vendor’s needs as well as your own. Why is the vendor working with your business, and how does working together help them achieve their business goals? Why have you chosen the vendor? 

Build a mutually beneficial relationship with vendors by negotiating fair prices and business terms that benefit both parties and ensure your procure-to-payment processes are efficient and clear.  In turn, your vendors will see you as a valuable customer and partner and will be more likely to give you preferential treatment.

Optimize AP workflows to improve payment efficiency

Suppliers like to be paid on time. Identify and address any bottlenecks in your current accounts payable workflows that may slow payment efficiency. 

One of the biggest efficiency gains comes from optimizing manual processes. For example, accounts payable automation solutions with intelligent document management technology use OCR to automate invoice scanning and reduce data entry errors. 

You can also improve payment processing efficiency by replacing inefficient payment methods like checks with more efficient electronic payment methods. Payment automation solutions like Stampli Direct Pay bring different payment methods together into one platform to make it easier to select the best one.

Improve vendor document and contract management

The average business processes thousands of supplier documents. Managing all those emails, SOWs, RFPs, certificates, vendor contracts, and licenses can be a headache. In 2021, Stampli surveyed finance leaders about why they invested in AP automation. Over one-third said it was because their AP departments were overwhelmed with paperwork. 

AP teams that rely on manual document management can get overwhelmed with paperwork. A key document can fall through the cracks, and work grinds to a halt while the inevitable wild goose chase to find it begins.

An automated vendor documentation system streamlines and centralizes document management processes by capturing, storing, and sharing documents in a centralized repository. It also helps you enforce vendor compliance with contract terms and regulations and helps your procurement team confirm if a vendor is compliant with company policies before purchasing from them.

Effective vendor management with Stampli

Stampli’s leading accounts payable automation solution leverages machine learning and AI to optimize and streamline critical AP processes. By automating these workflows, organizations can eradicate time-consuming and error-prone manual procedures with a real-time vendor management system.

With Stampli, you gain complete control over your supplier relationship management. Stampli’s AP automation solution, combined with Stampli Direct Pay and Stampli Advanced Vendor Management, empowers you to build strong relationships with vendors and achieve your business objectives.

Stampli Advanced Vendor Management (AVM) makes vendor onboarding, management, and maintenance a breeze. With AVM, you can request vendors to submit W9, 1099, insurance certificate, or any other document. You can collect payment details including vendor payment preferences, bank account information, and billing address (must have Stampli Direct Pay enabled). They can set preferred payment methods, bank account information, addresses, and contact information, simplifying the task of keeping vendor data current. You can easily onboard vendors, collect critical documents, manage information, and reduce back-and-forth emails – all to control spend, stay compliant, and strengthen relationships.

• Collect and maintain vendor information such as payment methods, bank account details, required documents, addresses, and more.
• Create any number of onboarding forms to define what is required for different vendor types.
• Collaborate with vendors more efficiently by centralizing communications in Stampli’s Vendor Portal.
• Create on-brand vendor experiences with customized log-in pages, email invites, and more using your company logo and color.

Stampli is the perfect choice for effective vendor management. Contact us today to arrange a free demo.