The health and viability of your business depends on your suppliers.
In fact, research indicates a significant amount of a company’s value is ascribed to its vendor relations.
Actively maintaining healthy vendor relationships can also lead to growth opportunities — because this really is a two-way street. You rely on your vendors to provide you the best tools to make your product or service the best it can be. And they rely on you, too. It’s important to think of your vendors as allies in your business.
Research from PWC indicates a positive relationship can lead to increased market share, better responsiveness to market fluctuations and increased return on investment. According to a McKinsey report, companies that collaborate strategically with their suppliers enjoy double the profits of their industry competitors.
Here are some essential strategies for developing, maintaining, and profiting from a healthy relationship with your suppliers, and how technology and automated AP makes a large contribution.
1. Write up professional agreements and resolve issues immediately
Solid contracts work both ways in ensuring you maintain a great relationship with your suppliers. You have entered a partnership — one that should be mutually beneficial and respectful so that both parties can succeed. As with any relationships, that means being precise about expectations and deliverables. This is especially important if things go off the rails and some kind of dispute resolution is required. The contract is your safety net.
Tailor the contract to your specific needs and be transparent with your suppliers regarding your requests. Take your time with this — ensure that all your requirements are addressed in your draft. Some of the elements you will want to include detailed description of the item or service, specifications, price, payment and delivery terms, and warranty parameters. Consider, also, adding details on how problems might be resolved without resorting to legal recourse. When issues do arise, it’s vital to deal with them swiftly and fairly.
Attend our upcoming webinar – Strategies to Strengthen Vendor Relationships and Get the Best Terms on Thursday, April 13th 2023 @ 10am PT/1pm ET Register here
2. Pay suppliers on time
Nobody likes to wait for their money. Delays in invoice processing create stress in many directions, both for you and your suppliers, exacerbating pre-existing issues and hindering their speedy resolution.
You might get away with one or two late payments, but if a supplier senses things are not going to improve, they may choose to end the relationship. This is why “invoice hygiene” is so important — efficient processing within the agreed upon parameters will ensure a healthy and mutually beneficial relationship with your vendors. Automating this process can help ensure on-time payment and efficient workflow for all your invoices.
Read more about the advantages of digitizing invoice processing for customers and suppliers.
3. Involve them in future planning
You and your suppliers are on a journey together — a journey that, hopefully, involves financial success, stability, and growing profits. In a way, your vendors are part of your brain trust. They operate in the same business arena as you do, they service similar client needs, they know the landscape of your industry. So, the stronger your relationship with them, the more they can help you to succeed, which, in turn, helps them to succeed. This is about loyalty, trust and working together.
For your most trusted suppliers, you can consider sharing your plans, such as growth and expansion plans or contingency plans in case of a crisis or sudden shift in your industry. You might find synergies that lead to new ideas or strategies. Your supplier may have an existing solution to a challenge you’re trying to solve – or know someone who can help.
Your growth plans might sync with those of your suppliers, leading to overall costs savings or other benefits.
4. Practice open, two-way communications
As much as 50% of a company’s value can be attributed to its relationships with its suppliers, according to science journal Heliyon. To achieve that relationship, open and honest communication is key.
With streamlined and clear communication lines, such issues as inaccurate orders or interruptions can be greatly reduced. Work with your supplier to find mutually beneficial means of communication, be they via a chat app or just good old-fashioned email. A regular meeting schedule can also help, where you can each share plans and examine your event horizon together.
Communication leads to collaboration, which in turn leads to a stronger and more productive working environment for everyone.
Discover some of the digital tools that can improve vendor management and invoice processing.
5. Focus on value, not just price
“You get what you pay for” may be a bit of cliché but that doesn’t make it untrue.
You might find a less expensive supplier — but one that comes with other headaches such as interruptions, quality variation, or communication issues. Or you could pay more for a 100% quality guarantee.
You need to determine what is more valuable to your organization and work with your suppliers to ensure your needs are paramount. There might be non-monetary perks, volume discounts or benefits in terms of speed of delivery. In the latter case, for example, a local supplier might cost more but provide added assurances around availability and speed of interaction.
Sometimes, convenience and peace of mind are worth the price.
Register here for our webinar Strategies to Strengthen Vendor Relationships and Get the Best Terms on Thursday, April 13th 2023 @ 10am PT/1pm ET
6. Use technology to help manage and improve how you work together
According to BCI’s 2021 Supply Chain Resilience Report, more than half of companies surveyed (55.6%) are using technology to assist with supply chain management and mapping.
These digital solutions provide insight into your supplier relationships that can inform the development of tactics to maximize vendor performance.
Automated AP is a significant part of the offering, which can track the status of invoices, orders, and deliveries. Technology can support a more timely, transparent, and efficient dialogue between you and your vendor, which significantly helps to bolster mutual trust.
Read how automated AP can improve communication and avoid errors.
Final Thought
Healthy relationships are built upon mutual agreement of the end goal.
With you and your suppliers, maintaining and building a viable business — for both of you — means your interests intertwine and your methods should too. It’s not always easy to achieve seamless symbiosis, but it’s worth striving for — and automating your AP processes can help make it happen.
