What Kind of Supplier Relationship Do You Want?

Large companies often have thousands of different suppliers. Managing such a vast number of suppliers requires effective creditor management and collaboration.

All companies should strive for good and efficient creditor management, even those with fewer suppliers.

We aim for a smooth and positive collaboration with our suppliers.

If you ask the question posed in the title to an employee in any accounting department, you’re likely to get an answer similar to the one above. Naturally. Who wouldn’t want that?

But how do you achieve it? While I don’t have a definitive answer, I have spent the last 25 years optimizing and digitizing companies’ invoice processes on the supplier side. I’d like to share some insights on how to ensure smooth collaboration with your suppliers regarding supplier invoices.

Why Spend Time on Supplier Invoices?

Most employees in the accounting department can relate to the fact that managing supplier invoices often involves manual work.

Up to 40% of all incoming supplier invoices contain errors and omissions.

We know this from the millions of invoices processed by our solution, InvoiceFirewall. While debating the high percentage is irrelevant for now, finding ways to improve the invoice process is highly relevant. Ultimately, this will enhance collaboration between you and your suppliers.

Wouldn’t it be fantastic if invoice errors and omissions could be automatically identified and corrected without manual intervention?

Let’s explore how this is possible later. First, let’s examine the process and why errors and omissions occur.

Why Set Requirements for Your Suppliers?

Large companies often set specific requirements for how they want to receive invoices from their suppliers. For several reasons: to ensure compliance with legislation, to optimize internal processes, and to automate as much as possible.

Optimizing the management of supplier invoices significantly impacts the daily operations of the accounting department. Our data shows that correcting a simple invoice error takes an average of 3 minutes. If, like most companies, you handle thousands of invoices each month and up to 40% need correction, it’s clear that this is a significant time drain, costing the company money and resources.

What Requirements Do Suppliers Typically Face?

Companies differ, so their preferences and requirements for receiving invoices vary. Common requirements for suppliers may include:

• Specific references on the invoice
• References in particular invoice fields
• Invoicing a specific company in the portfolio
• Correct company names, especially after mergers
• Correct addresses after address changes
• Correct company registration numbers corresponding to company names
• Specific payment terms for certain invoices – but not for all
• And many more

Why Suppliers Might Struggle to Meet Requirements

Like all companies, suppliers are diverse. They vary in size, accounting systems, and capacity to handle requirements.

You may be familiar with a situation where you ask a supplier to place a purchase order number (PO number) in a specific field on an e-invoice. From the supplier’s accounting perspective, it’s not always clear where this data should go in their system to ensure the e-invoice places it in the desired field.

The complexity increases with the number and intricacy of invoice requirements. Most suppliers serve many customers, making it challenging to meet every requirement.

Suppliers often include the required data in invoices. However, it’s not always in the “correct” fields from the recipient’s perspective. This is where manual work typically begins for the accountant.

Decide What Kind of Customer You Want to Be for Your Suppliers

I assume you want the most efficient internal invoice process. Therefore, it’s necessary to set some requirements for the information and format of the supplier invoices you receive.

I also assume you want the best possible collaboration with your suppliers, where both parties find the relationship as uncomplicated as possible, minimizing the time spent resolving invoice issues. The more efficiently both parties can work, the smoother the internal processes will be.

Companies that impose heavy demands on their suppliers may find themselves in a weaker negotiating position.

It’s crucial to consider how to make it simple and easy for suppliers to meet your requirements. Fortunately, there are tools and solutions that automate the entire invoice process, enhancing collaboration.

Automation That Helps Both You and Your Suppliers

One such solution is our own InvoiceFirewall. I won’t delve deeply into the solution, but I will explain how automation is possible.

For automation to occur, supplier invoices must contain structured and valid data. As the name suggests, InvoiceFirewall is the first point of contact for incoming supplier invoices. It automatically checks if it can perform a data cleanse, verifying the presence of necessary data and organizing it into the correct fields per your requirements.

Occasionally, data may be missing from the invoice. In such cases, the system automatically sends a message back to the supplier with a link to update the invoice with the missing data easily. This takes the supplier 10 seconds to correct, minimally disrupting the accountant only if absolutely necessary. This process is highly appreciated by suppliers.

This solution is far more efficient than having your accounting team call or email suppliers to retrieve missing data. It’s a waste of time for both parties and can be handled much more intelligently.

I hope you’ve stayed with me until the end. We’re almost finished.

So, Dear Reader, What Kind of Collaboration Do You Want with Your Suppliers?

At efacto, we aim to support our customers as best as possible. We want them to have the best possible collaboration with their suppliers. That’s why we’re excited to facilitate automatic data exchange and swift communication.

Remember, it’s okay to set requirements for your suppliers. This is essential in a trust-based relationship. However, making it easy for suppliers to meet your demands is equally crucial.

I hope this blog post has shed light on this topic.

Johan Bjørling,
Founder and CEO

Author

Johan wrote this blog post. Johan is one of the founders of efacto and has worked with e-invoicing for 25 years.