When you have automated accounts payable and eliminated manual processing, the next pain point to tackle may be supplier onboarding. According to January 2021 figures from the Institute of Finance Management, slow onboarding is the biggest supplier management challenge for 27% of accounts payable departments.
What’s the problem?
Vendor onboarding can be laborious when it’s done manually. It typically involves accounts payable staff chasing suppliers for key information about their business to get them set up in the system. The paper trail may include collecting contact and payment information, insurance certificates, compliance documentation, and more.
Often data is gathered over the phone or via email, and accounts payable personnel then need to enter or upload this information into company systems. Naturally, these manual efforts are slow and error prone; typos are commonplace so supplier records may start off incorrect.
This leads to problems down the line, such as exceptions for accounts payable to manage when invoices come in. These processing delays are costly to both businesses in terms of the time spent resolving the issue. For the supplier, it may also mean they are not paid on time.
The cost of onboarding vendors is not just the time invested sourcing and uploading paperwork, but also the time spent identifying and resolving the errors that have resulted from a poor process. Further, with little visibility of manual processes, critical compliance checks could be missed. This could leave an organisation exposed to risk or fraud.
Why automate supplier onboarding?
Automating supplier onboarding reduces operational costs as accounts payable officers do not need to spend their time following up with vendors on missing documentation. Instead, they can focus on higher-value activities such as managing supplier performance and identifying cost saving opportunities.
With all vendor master data easily available (including contract and compliance documentation), accounts payable can monitor supplier billing practices and track performance relative to agreed terms. Accounts payable can ensure that discounts are applied to invoices and service levels are met, identifying any penalty fees or refunds that the business may be eligible for.
Perhaps most importantly though, automation delivers a better experience for the supplier; vendors are set up in company systems quickly and efficiently and have their invoices paid on time, every time. In turn, this benefits the buyer who becomes a more valuable customer. As a result, they are in a better position to negotiate on price and payment terms, which can help bring down supplier spend.
How it works?
When a user initiates the vendor onboarding process within an accounts payable automation solution, the workflow sends the vendor an email with a link to a form requesting business details, compliance documentation, and payment information.
The supplier then enters their business information and uploads all the documents required. If any information is not supplied, the workflow generates an email requesting it, so the user does not need to do this. All supplier documentation is kept securely on the system and onboarding cannot progress until the records are complete.
The workflow then processes the information the vendor has provided, performing automatic look ups in the Australian Business Register to validate the company’s ABN and GST status, and confirm that the business is trading legitimately. The supplier form is then digitally routed to at least one manager for approval before they are activated in the system. This ensures there is genuine need in the organisation for the vendor, and that preferred suppliers are not already in place.
When the vendor is approved, the solution exports the data to the Enterprise Resource Planning (ERP) system’s master vendor file where a new vendor is created. Integration between systems means that data does not need to be input twice, which reduces the likelihood of errors, increases efficiency, and ensures duplicates are not created.
Now that the new vendor is set up in the system, the accounts payable automation solution can process its invoices without triggering an exception. This may improve the rate of straight-through processing, lifting efficiency and productivity for the buyer, and delivering on-time payment for the seller.
Automating supplier onboarding – in addition to invoice capture, processing, and approvals – benefits buyers and sellers tremendously. Suppliers enjoy a smooth onboarding process that they can take responsibility for, setting themselves up for on-time payments going forward.
For customers, automated supplier onboarding and compliance checks may help reduce risk, prevent supplier fraud, save costs, lift productivity, lower supplier spend, boost company reputation, attract quality suppliers, and more.
Automating supplier onboarding may be the next step for companies with an accounts payable solution that enables further finance process automation and transformation.