P2P Automation Has Transformed the Buyer/Supplier Relationship
Technology and the global economy have changed the way companies interact with suppliers: organizations have developed CSR (corporate social responsibility) initiatives that compel suppliers and sub-contractors to adhere to specific labor force rules; better informed consumers want to ensure that each component or ingredient in the product they buy is safe and reliable; and businesses and their suppliers need to guarantee that their digital platforms are compatible with one another in order to optimize productivity and profitability.
Compatibility of platforms is an issue that definitely impacts those involved in the B2B transaction functions of procurement, payables, and receivables. This past May, an article on PYMNTS.com featured Corcentric’s President and COO, Matt Clark, discussing this very issue and the problems that can arise when buyers and suppliers go it alone in their payables and receivables automation pursuits.
As Matt noted, “In the past, a buyer would initiate an internal IT project to process orders, invoices and payments, then take it to their supply base.” After investing millions of dollars into the project, the buyer would be informed that the supplier had also invested in and completed a similar project. However, since both buyer and seller had not communicated and thus aligned their projects, in the end both parties will have spent potentially millions for systems that will still need manual involvement or major IT fixes in order to allow for compatibility.
The “flexibility” factor
Buyers and sellers have different needs; how to meet those needs in ways that allow both to profit means sides of the transaction process need to be flexible. For instance, sellers want to be paid faster; buyers on the other hand want to either hold on to their capital longer or, if they pay faster, want some kind of reward for early payments. Both sides are looking for visibility into cash flow and improved management and control of their working capital.
How to satisfy both sides can be difficult; that’s where third-party solution providers are proving invaluable. Payables automation that takes a holistic approach to the P2P process can give both buyer and seller the speed, visibility, and data necessary to help satisfy their goals. Faster, accurate processing solutions that are scalable allow companies to grow their business without necessarily growing their headcount.
Where flexibility has been most effective, according to Matt, is in suppliers’ willingness to open up their data. “If you’re a supplier, a buyer having all of this data and visibility may not be a great thing,” stated Matt. “But it’s better for all parties to allow transparency and to allow for understanding of the motivations that both sides are operating with.”
Price still matters, but not in a vacuum
Visibility and data may provide the biggest long-term benefits to businesses. It is impossible to get either of these when procurement, approval, and payables functions are reliant on paper-based and manual processes. The data provided allows companies to consider more than simply the price of a product or service when developing a supplier base.
Minus other data, companies used to look at the individual price point as the only deciding factor. Now it’s more about the overall value of the relationship. Matt points to a situation where a supplier comes back with a lower price than their competitors; however, their order processing and billing procedures are highly inefficient, which means the total cost of managing the relationship will be higher. “The total cost of the buyer-supplier relationship is no longer only about the pricing of goods and services. It’s about the pricing and processing of transactions.”
Technology ultimately has changed the relationship between buyer and seller. If done right, with cooperation and communication and with the help of a solution provider, that relationship will be strengthened. It creates a win-win for all
See how Corcentric’s accounts payables automation solutions can help create a better buyer/seller relationship for your business.