Supply chains are necessary for manufacturers, but more than that, they’re necessary to sustain the world as we’ve come to expect it. Without these vital chains, the many aspects of modern life we depend on are disrupted.
We’re so dependent on supply chains, yet they remain invisible, or at least they did until recently. Today, rising inflation, global supply challenges and added pressures for all employees are translating into broken supply chains.
Unfortunately, there’s an all-too-common disconnect between highly automated, efficient supplier streams and the very manual, paper-heavy AP processes used to pay those suppliers. When supply chain disruption can imperil 62% of a business’s finances, and when half of businesses say 1 in every 10 payments go out late due to manual processes, the lack of modernization becomes a glaring problem even in a sea of glaring problems.
Most organizations are still making some check payments in 2022, and those payments are more vulnerable than any other payment type to fraud and costly mistakes. The reputational damages of fraud and the cost of slow, antiquated payments can undermine all the work you’ve done to otherwise modernize your supply chain, particularly in the current situation. When you need your organization focused on navigating the major challenges facing your business, this is not the moment to be bogged down in minutiae.
If you or your suppliers are located in rural areas, the impact of United States Postal Service slowdowns isn’t something you can ignore, either. The most widespread and significant changes from the USPS will affect first-class mail, which includes letters, small packages, bills, and tax documents. That “means mail delivery will be slower than in the 1970s” for an estimated 40 percent of first-class mail.
In addition, the amount of mail being transported by plane is going down from 20 percent to 12 percent, and postal rate hikes of 6.8% went into effect last August. That means if you’re still sending checks, they’re more expensive than ever and they may get to your suppliers more slowly than ever before.
There are better ways forward. Paying suppliers on time and in their preferred format can strengthen relationships and prevent breaks or delays when you need them least. In addition, you can take what is likely a card program with lackluster rebates and turbocharge your rebate potential with the right virtual card payment provider. There’s no reason your suppliers can’t enjoy the benefits of virtual card while you enjoy better rebates, is there?
These supplier benefits, plus reduced costs and inefficiency for organizations making payments, are the reasons so many accounts payable departments are now focusing on automating invoice-to-pay processes. The time and cost savings of automation pay for themselves and give your accounts payable team the opportunity to think strategically.
A simple solution for a complex problem
The good news is that with the right financial technology or bank partner in place, the transition to invoice automation and payment modernizing is much less daunting than the necessary work to streamline and modernize your supply chain. After all, you’ve probably already done that, or you’re mid-stream today. You don’t need to throw out your tried-and-true accounting systems, processes and people, as AP automation ideally will mesh with all of those and make them more efficient. With the right payment mix, your suppliers will realize benefits from the convenience and flexibility of virtual card or ACH payments, while your organization can benefit from a new source of cash via rebates earned on these transaction types.
You can’t overstate the benefits for your suppliers, either, as it’s a happy offshoot of the right payables process. Organizations that transition to electronic payments can offer greatly enhanced remittance data in their suppliers’ preferred formats, including CTX, custom AR files, and emails. Those conveniences make it much easier for suppliers to apply cash when electronic payment is received, and provide them with enhanced AR reporting capabilities, adding real value to your relationship in a way that is not possible via checks alone.
It would be unwise to overlook fraud, as well, even if it can fade to the background when you’re dealing with so many other visible issues. Electronic, auditable invoice receipt and approval workflows help prevent or provide visibility to fraudulent invoices. Electronic payments carry the advantage of being much more difficult to alter, redirect, or otherwise be exposed to fraud. In the case of virtual card payments that utilize a one-use number for an exact amount, the chances of a payment being intercepted dwindle even further.
A sophisticated payments partner should have built-in monitoring that can identify threats and stop unauthorized movements of funds and securely maintain sensitive supplier bank information so your organization doesn’t have to. Given the very real and very heavy costs associated with fraud—and given that most businesses report at least experiencing a fraud attempt in the last two years—these are no small advantages.
Considering all the benefits to AP automation, it’s little surprise that adoption is becoming more widespread. The long-standing worries about perceived costs, misconceptions around the difficulty of implementation, and inertia around existing processes have been washed away by the flood of problems COVID-19 and the supply chain crisis have introduced. It’s all about making it happen easily and quickly so the benefits can begin.
With the technology and business intelligence available today, there’s no reason to put off making your accounts payable team and processes more efficient. The pressure to lower costs, protect your business from fraud, and streamline everything you do on a daily basis, not to mention the backdrop of crises manufacturing is facing today, make it evident: If this isn’t the moment for change, there isn’t one.