Because any friction within the supply chain can heavily impact customers, it’s imperative that activity and transactions taking place between an organization and its vendors, including invoice payment, runs smoothly. To that end, automation can prove an invaluable boost to vendor payment workflows, while a lack of automation can lead to significant delays and complications.
Studies prove inefficiency results in late payments
“16% of businesses admitted that their payments are consistently late.
One issue that can negatively affect business-vendor partnerships is delayed payment on a contracted invoice. According to recent statistics included in The Friction Index from Tungsten Network and the Institute of Finance and Management, nearly half – 47 percent – of organizations have failed to meet agreed-upon payment terms in 10 percent of all supplier invoices.
Worse still, 16 percent of businesses admitted that their payments are consistently late, and only 5 percent of companies noted that their invoices are always paid on time. Reporting on the study, Business Cloud contributor Muhammad Aldalou noted that one in 12 businesses have no processes in place to monitor their payment practices.
Overall, researchers found that the chief reason behind these late payments are slow, manual processes being leveraged as opposed to more efficient automation.
“Our research shows that when it comes to late payments, clunky internal processes and slow paper-based systems are the predominant causes, leading to friction in the supply chain,” noted Tungsten Network CEO Richard Hurwitz. “Identifying instances of friction within the procure-to-pay work stream is the first step towards removing them and in many cases, technology can do away with these cumbersome and menial tasks taking up precious time and instead boost productivity and efficiency.”
Additional inefficiencies impact invoice payment schedule
According to the study, slow internal processes were identified as the top supplier payment challenge by 64 percent of companies, and 39 percent of businesses pointed to a lack of automation.
Other challenges included:
- Errors on the part of administrators (27 percent).
- Struggles involved with managing the volume of invoices (20 percent).
- Cash flow management issues (16 percent).
Supporting supplier relationships with on-time payments
Businesses that consistently make late payments to vendors put these important relationships in jeopardy, and risk falling behind competitors able to provide better experiences to customers. In order to better support vendor partnerships, businesses should automate their accounts payable invoice payment processes, ensuring that payments are made according to contracted deadlines.
“39% of businesses identified a lack of automation as a leading supplier payment challenge.”
Automation can eliminate the kinds of time-consuming, manual processes that heavily contribute to slow payment processes. In addition, this level of reduced human interaction also decreases the chances for costly errors.
“Late payment impacts working capital and economic production,” Hurwitz noted. “Arranging invoice payments can be a complex task, particularly if it’s cross-border and involves ensuring compliance with local tax laws. Businesses should feel supported, not pressured, in ensuring that their suppliers can be paid on time.”
A best-in-class automated solution can resolve common payment struggles, while streamlining partnerships between businesses and their suppliers. To find out more about the benefits of automated accounts payable processes, contact the experts at SK Global Software today.