Business is about relationships. Before revenue, profits, top line, bottom line, organic growth, inorganic growth, or any other things; it is about relationships. No jargon can define business more simply. It is much costlier to acquire a new client than to retain an existing one. However, relationships do not go till clients only. It is on the supplier side as well. You simply can’t afford to lose a vendor whom you can trust. The relationship between a vendor is as important as that of clients.
One of the pressure points where a good vendor relationship can be maintained is On-Time Vendor Payment. You may have a 30 days cycle or a 60 days cycle. However, once agreed, you need to pay on time. That is how you maintain relationships. However, it is easier said than done. These are back-office work. Most of the time, CFOs or higher officials simply do not have enough time to look into the routine stuff which can ruin a good relationship with the vendors. That is why CFOs have to ensure a robust process is in-place for on-time vendor payments.
Centralize the invoice processing:
One of the areas where CFOs can implement improved strategies is by centralizing invoice processing. Invoice processing is an area where fraud can happen easily. Therefore, clear responsibilities have to be assigned. Work Orders have to be generated for every task, and the finance team should be notified of each work order. Sometimes for very low volume tasks, work orders are not created. Even then, the finance team has to be informed. There should be clear responsibility defined as to who will process the work order. The entire operation should be centralized. Every invoice should be tracked against work orders and payment will be made against them.
Automation is the future:
Automation reduces the workload by a considerable amount. It reduces the manual intervention and thereby reduces the chances of manual errors. If a due date for payment is on 29th August, the software will remember that without fail.
Outsource the process to an offshore center:
Outsourcing is another good alternative for CFOs to manage on-time vendor payments. In recent years, outsourcing has been popular for various reasons.
Vendor payments are one of the services that have been successfully outsourced. Some of the benefits of outsourcing the service are:
- The offshore person has no interaction with the vendor. For him, it is just a name in black and white on a piece of paper. He does not have any incentive to make any kind of fraud. Therefore, the risk is mitigated.
- The overall cost of the operation is reduced. It is true for all kinds of outsourcing. And it holds for vendor payment as well. So CFOs can achieve quality work for a fraction of the cost.
- The outsourced team will look after one particular task only. This repetition of work increases accuracy and efficiency.
There are many ways a CFO can ensure on-time vendor payment. Only a few are discussed here. However, it is important to ensure vendor relationships. CFO has to make sure a process is in the place where on-time payments are ensured.
ARDEM provides Business Process Outsourcing and Business Process Automation Services to established companies to help them improve operational Efficiency and Reduce Costs. For more information please reach out to us at firstname.lastname@example.org or call us at 908-359-2600.