An early bird gets all the worms. In this case, an early buyer gets all the discounts. Discounts are a ray of hope to the small and medium businesses, which let them compete with the large companies in the market. Early payment or dynamic discounting is an excellent way to ensure that the relations between you and your supplier are not strained, and it is beneficial for you.
This article highlights the importance of paying early in a business deal and how you can claim the advantages of early payments.
Dynamic discounting
Dynamic discounting is a way by which you can get discounts by paying early. This is a way to leverage your supply chain so that it is beneficial for both parties, the supplier and the business. It is a flexible way to make payments on your terms; you can choose when to pay and how soon to pay. While traditional methods are more straightforward, like ordering in bulk or bargaining, dynamic discounting is much more efficient to go about doing your business.
Dynamic discounting is denoted in such a way: “5/15 net 45”. This means that a discount of 5% can be availed by the buyer if they pay the money in 15 days. The net 45 part means that the payment can be made in 45 days; however, the discount can only be availed in the specified period. You need to be very careful when you make payments, or you can automate your AP workflow for the same.
How important is an early payment?
Early payments are the key to your business’ success. If you pay a vendor early, it helps accelerate the cash flow in both the companies (yours and your vendor’s) and lets them reinvest the money sooner. It also generates a sense of trust between you and your supplier, and it completely negates the risk of bad debts (payments you cannot make). Making early payments can also expand your repertoire of suppliers you can approach, like the companies that work on a cash basis rather than an accrual accounting basis.
Early payments are an excellent marketing scheme. They go well with startups and medium businesses; early payments are more feasible than traditional ways of making payments. This is because they are in a growing stage, and they don’t have a customer base large enough to make use of the entire stock they buy (if they buy in bulk).
How Can You Get Them?
The best way to avail of discounts in this market is to automate your AP workflow. This is really advantageous for new businesses, as they can start off with an automated workflow, unlike large companies which have a pre-established workflow. What does AP workflow automation mean? It means that you are leaving the manual tasks like filing, storing, and paying invoices to the software, which helps you automate the workflow. This makes sure that your work becomes more precise and efficient.
The best way to see if your vendor offers early payment is to ask them. It is as simple as that. If they provide early payment discounts, all you need to do is enter a date into your system by when you need it done, and that’s all. You will save a lot of money this way; it is a godsend for small and medium businesses.
What can go wrong?
There are several steps involved in the accounts payable process, which include writing the names of the vendors along with their details and then waiting for the confirmation, after which the payment process finally comes to an end. This process includes a lot of time and steps, especially if the data is prepared manually. This even increases the risk of payment failures or errors.
There are possible chances of losing your hard-earned money due to duplicate payments. Sometimes, you can end up paying for both original and duplicate invoices. Besides, it also becomes difficult for you to keep track of which business location is paying which vendors if your business is running in multiple centers.
Early payments don’t have too many risks associated with them, but if there is an error in the AP workflow automation, there can be improper payments from your side. It would be best if you were careful of the amount you are sending to your vendors.
Conclusion
In conclusion, the best way to avail of discounts without bargaining or ordering in bulk is to automate your AP workflow and make early payments. It would be best if you asked your vendor whether they provide the services. Small and medium businesses don’t have the option to spend too much money on procuring supplies over research development. So you should make sure that you can avail such discounts to save money.
An AP workflow is the heart and soul of a business. The people who manage it, AP clerks, have a hectic life. An AP workflow involves paying off debts taken from vendors by the business, paying off receipts on time, and deciding when the next batch of inventory should be ordered. It is also closely linked with vendor management and inventory management, so there isn’t a moment of rest in their lives.
This article highlights the responsibilities an AP clerk has to complete in a day. It is a hectic day, but here is all that transpires.
Invoice Duties
Invoices are an essential part of an AP clerk’s duties. They are the proof of a transaction, and maintaining them is a task and a half. They need to ensure that these invoices are not lost, damaged, or duplicated. Verifying that every invoice is unique is necessary; otherwise, the company can incur losses worth millions of dollars. It is a huge responsibility that cannot be taken lightly.
Invoice duties can also involve verifying other items on the receipt. This can include tax ID numbers, the number of products that arrived, the freight charges, calculating the line charge, and availing of all discounts possible. All the invoices need to be paid accurately and on time; if these payments are delayed, the company might face late payment charges. This is just a microcosm of the day; there is a lot more in store.
Accounts Receivable
Accounts receivable means making invoices for clients and debtors. These invoices need to be appropriately made, ensuring all details are in place so that you don’t get paid less than you need to be. These invoices are the core of an AP workflow (accounts receivable rather than accounts payable, but the concept is the same). This also means that you are responsible for generating profits for the company by reminding people to pay invoices and sending them out.
You are also supposed to make payment reminder notices, process refunds, check for all the unpaid dues, deal with the outstanding invoices, and so on. Accounts receivable is an essential part of a business; it is one of the ways by which it makes a profit. An AP clerk is assigned to manage this part of the business, which is a great deal of responsibility.
General Accounting
The general accounting part of your business that is handled by an AP clerk involves managing ledgers. You have to take care of all the aspects, the ins and outs of the transactions that occur in your company and make sure that none of them exceeds the company budget. It also involves specifying the budget to accounts and cost centers and the evaluation and the generation of expense reports. Closing reports at the end of the accounting period are also an essential part of this job.
This job is the most important, invoices can be made by software at times, but the accounting part is preferably done by people to ensure that not a single transaction is left out. This is mainly because these reports need to be given to the appropriate government agencies and the necessary higher-ups. These parties then evaluate whether the company has performed well or not.
Internal Relations
Internal relations are a set of responsibilities for AP clerks who work in companies with multiple branches. While it is more responsibility, it also ensures greater pay for you. What do internal relations involve, though? You will need to interact with AP clerks of other branches, accounting personnel, and heads of department of various departments from other branches to make sure that everything is going smoothly and there are no discrepancies.
These discrepancies can be a pain to handle. Suppose a vendor is providing you with a discount he isn’t providing another branch with; you need to take it up with the vendor. There can be invoices that have not been adequately signed or require the sign of higher authorities from other branches too for approval. This aspect of the responsibilities of an AP clerk involves a very high level of communication that they are expected to have.
Team Management and Confidentiality
Two main aspects of an AP clerk are confidentiality and team management. Confidentiality involves not leaking the invoices outside the company, not leaking the information that can harm the company, and not leaking the vendor details. Team management requires a great deal of leadership skills and communication to do appropriately. You need to make sure that your team works appropriately and all the vendors follow the regulations. These two aspects of an AP clerk’s responsibilities go hand-in-hand. The people who are privy to the details should be in your team and those who aren’t should not.
The pandemic changed a lot of things about the way the world operates. While day-to-day operations became difficult, industries around the world came up with new means and methods to keep on functioning. In a situation where people could not leave their houses, digital and technological tools came as a means of salvation.
What would have happened anyway accelerated in a matter of a few months, making our society advance at a rapid rate. This not only brought a change to how we do things, but it also changed various scopes and gave birth to new opportunities.
In regards to that, here in this article, we will focus on one such particular change — vendor management from home. We will discuss the major changes that occurred in this field and what new aspects came to light under the new circumstances. Then, let us quickly go about our way.
How Vendor Management Changed During The Pandemic
Vendor management is the process of dealing with all activities related to the purchasing decisions of a company. This includes selecting and approving suppliers, entering into contracts with approved vendors, managing them, and ensuring that they live up to the agreed expectations of the company.
While vendor management has always been around, recently, it has risen to precise prominence, where people started understanding how important vendor management is. The better you manage your vendors, the better the later outcomes will be.
Vendor management was already getting better tools and aids to increase efficiency and productivity, but due to the pandemic, the upgrade sped up rapidly. As people had to stay back home, Vendor Management Software or VMS rose to prominence.
VMS is a system or software that allows you to effectively manage your vendors and every other related activity through a single centralized platform. Through this software, vendor managers and procurement teams were able to keep functioning even while they were restricted to the boundaries of their homes.
The Role Of Vendor Management Software During The Pandemic
The VMS market started growing rapidly after the start of the pandemic. In 2019, the market was valued closely at 5.21 billion USD and was said to have a steady growth rate ao approximately 13% in the coming few years. This data will give you a brief insight into how rapidly the VMS market is growing, and for good reasons.
During the pandemic, the VMS rose to prominence where it allowed vendor managers to actively manage the vendors of their companies through a centralized platform. While it was a sudden jump from physical and traditional means to a complete online and digital method, the results were excellent.
If anything, the AI and automation features of the software made the procedures much more efficient, organized, simple, and high in productivity. Here are a few prominent features of the VMS to help you understand why it had the effect it did:
Simple procedures for vendor onboarding
Easy and effective tracking features to have an overall view of various vendor status
Highly collaborative functions such as self-service portals to ease collaboration efforts and increase efficiency and save time
Easy access to vendor data, allowing for critical reviews and changes
As you can see, all these features allowed you full control of your vendor management, even if you were unable to step out of your house. It allowed you to operate in the same manner, with better results even when you could not physically carry out the tasks.
Along with VMS, other useful tools made it easier for vendor management teams to keep at their work even during lockdowns. Various online conference and video calling tools allowed managers to seamlessly stay in touch with vendors, where all meetings and conferences started being online.
There were also major changes to the numerous procedures as more and more digital tools started making their way into the workflow. Even if no one could go to the office, cloud storage, IoTs, and so on allowed team members to stay in touch with each other to carry out operations and projects.
Vendor Management From Home — Roles And Responsibilities
During the pandemic, when offices were closed down, vendor managers, along with other personnel, had to come up with their own rules and regulations to operate systematically. Here are a few roles and responsibilities that vendor managers and other teams members had to abide by to successfully keep working even from home:
Abiding by common ground rules and regulations set up by the company to ensure the safety of company data
To make sure that you have the right equipment and tools to work from home without any hassles
Setting up a make-do office space in your house to ensure full concentration and focus on work
Learn to correctly use the right phone application, software, and other tools
The pandemic saw a lot of changes in the various industries across the globe. While the vendor management industry requires a lot of on-site actions, thanks to VMS and other tools, companies were able to make great progress in this field.
There are times that you need to put a vendor out of business, which means leaving a vendor to get products from someone else. There can be various reasons why you need to put a vendor out of business, like the vendor not delivering on time, the vendors not following certain rules of your company, or you have evolved out of your vendors.
The following article highlights how you can lay off a vendor easily and the things you need to consider before doing so. Putting certain vendors out of business is very necessary; otherwise, you can suffer losses that can be difficult to pay off.
Get involved before signing contracts
Before you lay off a vendor from their work, it is important to know whether or not you have some other ways of making them aware of their poor performance. You can check to see if they have a website or an online community. This also goes for the vendors you are aiming to keep in the loop after putting your existing vendor out of business. You need to get involved with new suppliers after putting the existing ones out of business so that you have a variety of vendors to choose from.
Gaining real hands-on experience is very necessary to know more about the vendor, the service and the goods they provide, and their feasibility for your business. Before getting new people to contribute to your business, you must get to know them; otherwise, you may experience regret for not choosing well while being misinformed due to third-party opinion. Once you choose a new vendor and lay off the old one, there is no going back for a while. Think of long term business plans
Some vendors might be performing poorly due to a clash of opinions. What does that mean? It means that they might not be the right choice for you anymore, as you have evolved as a business. If you were initially a small business and have now been acquired by a larger company or have outgrown your initial need for produce and products, you cannot keep on working with the same supplier.
Due to this, you might now need a bigger supplier who is a part of a conglomerate and can provide you with bulk materials. So, you are expected to go with a new supplier, who can fulfill these needs, and fulfill them on time. There can be times when you cannot deal with the supplier’s increasing product costs because they are outgrowing you. In such a case, too, you need to take care of supplier migration.
Check your vendor management chain
You need to inform the top brass about the change. Just because you have made the decision to change the vendor doesn’t mean the decision will always get approved. There are various formalities that need to be done before putting a certain vendor out of business, which can only be taken care of after you have received permission from the higher-ups. For example, you need to inform the head of sales that a certain vendor isn’t delivering on time and needs to be immediately replaced due to the losses they are causing to the business.
There can be times when things go wrong. In such cases, if you have informed the management regarding the decision, you don’t need to worry about the technicalities; your company’s lawyers will take care of the necessary work. Sometimes, vendors understand why they are being replaced, but there can be times when a huge ruckus is caused. To curb this, proper communication in the company is required.
How easily can you migrate
The ease of migration is a major factor that plays a role in the vendor replacement process. You need to know how easily you can switch the places from where you acquire your products, how long the lag time is (lag time refers to the time it takes the product to come to you from the supplier), and what is the drop in the product quality (if any). After making these decisions, you can safely migrate from one vendor to the other.
You also need to note how well these vendors can be incorporated into your company. A certain vendor might be giving you trouble due to their attitude, but would be performing well in the company, so replacing them won’t be as feasible. There are various such factors to consider before migrating to a better vendor.
Conclusion
In conclusion, these are the things you need to consider before replacing a vendor with a new one. Replacing vendors is a drastic measure you take if no other option is working. Hopefully, this article helped to resolve the trouble you are facing in your company regarding vendors, vendor replacement, and any such related issues.
Vendors are one of the most essential parts of a business; meetings with them are necessary to plan the future of your venture. However, times are uncertain, which means situations can go either way. You need to be prepared for all cases, considering the pandemic has had various peaks. There are other factors like your vendor’s location from your headquarters and the money invested in the product you are buying from the vendor.
Businesspeople discussing business on virtual staff meeting during pandemic
Making preparations for all kinds of situations entails various procedures to take care of; you need to adjust for both online and offline meetings.
Offline meetings (Why it is a good option)
Offline meetings sound like a myth, or to an extent, a thing of the distant past, don’t they? With the signs of a receding pandemic, people are getting a bit more daring to conduct offline meetings (although with proper precautions). There are many ways in which you can prepare for offline meetings, and it is good for your business in a plethora of ways.
In an offline meeting, the chance of a communication gap to occur is absolutely minimal; the conversation includes a great deal of body language and how the other person is responding to your proposals. You can shake on certain deals and get your vendors to sign on these deals on the spot. You can expect your expectations to be met and make sure that these products reach you on time.
Offline meetings also have a certain feel to them that can’t be sated by any other form of communication. Once you communicate something face-to-face, you know that you have said your piece properly and have the right to wait for any kind of doubt or wait for the right product to arrive at your doorstep.
Things to take care of for offline meetings
With the ongoing pandemic, there are many things to take care of, like how people behave in a heated discussion. The fact that there needs to be a certain amount of social distancing remains true, while also that the vendor and the buyer need to wear masks for the duration of the meeting and en route to the meeting. All this needs to be taken care of while keeping in mind that the embers of the virus still exist, waiting for a chance to create a wildfire.
Proper sanitization of all facilities is also very necessary so that in the off chance that there is any existing, it gets eliminated right then and there. This procedure should be done regardless of whether meetings have to be held in the room or not; if you are using your office facilities, it should be a safe space for all the employees. This way, you can avoid any potential cases in your office.
Online meetings (Why they are good)
Online meetings are very user-friendly; you can have them for however long you want while sitting in the comfort of your house. They are a method to stay away from people while also staying close to them. There are a plethora of ways in which you can hold an online meeting; you can hold it over a conference call or over any application that provides online meeting facilities. There are various ways in these applications, too; you can create breakout rooms, you can separate people for some specific tasks.
They are easy to manage when there are fewer people. You can mute and unmute people and manage the disturbance that might be caused in this meeting. It also automatically takes care of social distancing and maintaining any form of covid protocols. Online meetings are definitely the way to go if things go wrong.
Things to take care of for online meetings
There are various things you need to take care of for an online meeting. The first precaution is the fact that you have a stable and strong Internet connection. If you want to have a meaningful conversation over the Internet, the requirement of a good connection is a necessity, and without it, these applications are meaningless. The fact of the matter is that even if you want to do some deal over a conference call, you need to have a good connection. To implement this, you need to buy a good plan for your home (or your office, wherever you will get your meetings done.)
Another thing to keep in mind is the decorum that has to be maintained during an online meeting. While it is not always the case that there will be chaos, you shouldn’t take any chances with these important meetings.
Conclusion
In conclusion, you should be ready no matter how situations turn out. Online or offline, these things should be taken care of as swiftly as possible. Necessary precautions need to be taken, but take care of how the pandemic turns out.
