When businesses discuss relationship-building, they often emphasize customer interactions. However, relationships with vendors are equally crucial. Strong vendor relationships can unlock new opportunities, offer personalized support, and help avoid common payment issues. They also bolster your reputation within the industry, marking your business as trustworthy and efficient.
The cornerstone of any vendor relationship is your payment process. Timely payments and excellent communication are vital to building trust with external stakeholders. Yet, if you’ve ever been overwhelmed by bills, invoices, and account statements, you know vendor payments can be complex. There is, however, a simpler way to streamline this process. In this article, we’ll explore how to create a well-organized and efficient vendor payment system.
What is a vendor payment?
Before delving into processes and tips, let’s clarify what a vendor payment is. A vendor payment occurs when a business pays a supplier or contractor for goods or services received. While it might seem straightforward, the process can be intricate due to multiple invoices, varying payment terms, and constant follow-ups.
Are You paying your vendors on time?
Recent statistics reveal that 41% of buyers faced late fees on vendor payments in 2021, often due to data entry errors from manual processes. Such disruptions can delay supply chains which negatively impact business operations.
Why is improving vendor payments important?
Prompt payments to suppliers reduce late fees, foster strong vendor relationships, and ensure a healthy supply chain. Vendors prioritize companies that pay on time, especially when resources are limited. Paying vendors promptly helps maintain access to essential products and services, which is crucial in a fast-paced global market.
Unfortunately, many businesses struggle with this. A 2023 Atradius report indicated that 53% of B2B invoices were overdue, with 7% written off as bad debt. Payment durations remained stagnant or worsened for 93% of companies, with 51% expecting further deterioration.
Accounts payable teams are key to maintaining good vendor relations and timely payments. Yet, many companies face challenges with manual processes, disorganized systems, and poor visibility into payment metrics. This makes timely payments difficult, especially during economic downturns.
What causes late vendor payments?
Several factors contribute to late payments:
- Economic downturns
- Complexities of international money transfers
- Inefficient payment processes, such as manual invoicing and unclear payment terms
A well-crafted, automated vendor payment process can help avoid these issues, enhancing accuracy, streamlining cycles, and improving business relationships.
If you’re ready to revamp your vendor payment operations, consider our detailed tips that cover everything from utilizing technology and automation to optimizing international payment timings.
Optimize your vendor payment process
Optimizing a vendor payment process is a collective effort. It’s not only about involving the accounting department — it’s about engaging members from various departments. Any modifications or the creation of a new process should incorporate the insights of those directly and indirectly involved in vendor payment management. For instance, the procurement team is crucial in setting terms with suppliers, while the IT team provides automation solutions for vendor payments. The process should include straightforward procedures and designated responsibilities at each stage, ensuring everyone is aware of payment terms and related rules. Team members should be well-versed in their roles, with regular workshops and training sessions to enhance their understanding. Remember, developing your payment process is not a one-time task—it’s a dynamic process that should evolve with your business growth and technological advancements.
Implement Automatic or Recurring Payments
Setting up automatic or recurring payments is like having a well-oiled machine in place. This ensures payments are sent out on time, reducing the likelihood of overdue payments or late fees. Automating your vendor payments involves embracing digital solutions. One such solution is Yala. With Yala, you can set up automated payments for your vendors ensuring that payments are made on time and accurately with minimal manual input and errors.
Utilize Batch Payments for Vendors
Processing vendor payments individually can be time-consuming, especially when managing contracts, negotiating rates, and handling invoices simultaneously. Batch payments streamline this process, allowing multiple payments to be bundled and processed together. The batch payment process significantly enhances efficiency, and with Yala, you can pay multiple international vendors in various currencies at competitive and affordable rates.
Negotiate Extended Payment Terms
Balancing cash flow—money in and money out—is essential for every business. If your business purchases goods from a vendor with a 30-day payment term, imagine the impact of negotiating a term of 45 or even 60 days on your cash flow. Extended payment terms provide your business with additional breathing room. It allows you to retain your funds longer, offering a cushion for unexpected business expenses, giving clients more time to pay, and providing opportunities for short-term investments. By the time you need to pay your vendor, your business may have generated extra income from short-term investments or customer payments, ultimately optimizing your cash flo
Monitor Transfer Fees – Domestic and International
Whether sending money domestically or internationally, small fees and hidden charges can accumulate and negatively impact your bottom line over time. Bank transfers come with certain fees, which could be a flat transaction fee, a percentage of the transferred amount, or both. Therefore, selecting the right payment service is crucial. International transfers are typically more expensive due to currency conversion rates and higher percentages and fees. Yala offers transparent pricing, where fees are shown upfront before you pay, ensuring you only pay for what you use.
Optimize Timing for International Payments
International business involves dealing with fluctuating currency exchange rates. It’s important to monitor conversion rates, as they can significantly affect transaction costs. Businesses should leverage timing to maximize profitability, making payments when conversion rates are most favorable.
Select a vendor payment service provider with high transfer limits and excellent service
If your business frequently handles large-sum payments, transfer limits can be a significant hindrance. Ensure you choose a financial provider with high transfer limits to process large amounts of money without restrictions. Some providers have lower caps than others, so select one that offers the flexibility you need. Ideally, your financial service provider should support high transfer limits for major currencies like EUR, GBP, and USD, allowing you to handle transactions without delays or the need to split payments. Instant payments are becoming the norm, offering convenience and speed crucial in the fast-paced business world. Yala offers these features and enables businesses to send money instantly to numerous countries, ensuring timely payments to vendors regardless of their location.
With Yala, you can streamline and simplify your financial operations through invoice collection, account receivable management, international payment, global invoicing, expense management, bill pays, tax management, checkout, corporate cards, and payment links.
Who is Yala for?
· Small to Medium-sized Enterprises (SMEs): Businesses looking for efficient cross-border payment solutions.
· Large Corporations: Companies requiring robust financial management tools for global operations.
· Accountants and Finance Teams: Professionals managing invoicing, payments, and expenses.
· E-commerce Businesses: Online retailers needing efficient checkout and payment solutions.
· Freelancers and Contractors: Individuals managing international clients and payments.
Why should you choose Yala?
With Yala, you can expect:
1. Simplified Payment Processes: Say goodbye to complex paperwork and lengthy processing times. Our streamlined platform makes it easy to initiate, track, and manage international payments.
2. Competitive Exchange Rates: We offer competitive rates and transparent pricing, ensuring you get the most value out of every transaction.
3. Compliance and Security: We adhere to strict compliance standards and employ the latest security measures to safeguard your data and funds.
4. Personalized Support: Our dedicated customer support team is here to assist you every step of the way. Whether you have questions about our services or need help resolving an issue, we’re always just a phone call or email away.
