Suppliers are the key players in B2B payment automation
It’s a difficult time to be a supplier. As companies conserve cash amid difficult economic conditions, suppliers are often the ones who feel the financial strain.
Payment terms get extended. Buyers seek to renegotiate contracts to optimize their processes and adapt to new solutions. But then their suppliers are left out of the discussion until they’re presented with their marching orders.
Even though a company’s first responsibility is to its bottom line, it cannot afford to forget that suppliers are ultimately responsible for their ability to deliver revenue. It’s especially important right now that companies take care of their suppliers for the supplier’s benefit as well as their own.
If suppliers don’t get paid in a way that works well in their processes and systems, it causes many nightmares for their accounts receivable team. Those nightmares can spread throughout the organization, causing stress and frustration.
That frustration sometimes manifests as a conflict between buyers and suppliers. In my prior finance roles, I saw my fair share of suppliers who went to great lengths to make their dissatisfaction known, from verbally assaulting my unsuspecting colleagues to threatening lawsuits.
When suppliers go to these lengths, it’s because they're desperate for action on the buyer’s part. In today's environment, their distress is twofold. Payment amounts that seem negligible to buyers make a significant difference to suppliers. Recently the flow of payments from AP to AR teams has slowed as companies conserve their funds as long as possible. The ebb and flow of this process has always been present—it’s how many companies do business. But this year suppliers are feeling the strain more than usual.
In 2001 and during the Great Recession, we saw that when the economy struggles, finance departments add aggressive collections specialists to their accounts receivable teams to collect overdue money from their customers, relationships aside.
In my experience, AP people are helpful, conscientious, and tough. They have to be, as the liaison between their company and its suppliers. Right now, they’re on the front lines, battling to conserve cash. If past downturns are any indication, they’re currently bogged down with calls, and morale is dipping as the number of irate callers spikes. What’s worse, that stress and emotional exhaustion can cause high turnover rates, which in turn leaves companies in a constant cycle of training new-hires—a drain on already-limited resources.
From a strategic standpoint, if you're not getting payments to suppliers in a way that's conducive to their operations, they could go out of business. They might also choose to stop working with your company altogether. To them, not all customers are ideal, and as more of them abuse the “customer is always right” notion, suppliers have to withhold the benefit of the doubt and act in self-preservation.
I’ve experienced both positive and negative aspects of the financial battle. On the one hand, I’ve negotiated with large retailers who ground businesses down to the thinnest margins. Smaller companies who rely on their enterprise customers to stay afloat are often forced to accommodate them, knowing that they are expendable and replaceable. Conversely, I've worked with a global manufacturer that valued its supplier relationships and would only offer early payment discounts and supply chain financing if they knew it would benefit the supplier. This company holds stress-free, decades-long relationships.
When suppliers don’t get paid on time, they may decide to deprioritize the offending customers. By becoming a nuisance in their process, your supply chain could feel the impact. Ultimately, this hurts your ability to generate revenue.
Fortunately, more companies seem to value their supplier relationships than not. I recently participated in a third-party study to understand what potential payment automation buyers value the most about adopting such a solution. Supplier experience took the third spot after efficiency and fraud protection.
Supplier experience appears in our buyer persona research too. When I meet with customers, they want to ensure that we treat their suppliers well. It's not only part of the company culture they wish to instill in all of their relationships, but they also worry about the impact on their AP team and the supply chain if something goes wrong. They understand any economic impact on their suppliers ultimately translates to higher prices.