Let's chat about a money leak that's quietly draining cash from your business.
Paying suppliers seems pretty straightforward, right? You get an invoice, approve it, and pay up. No big deal.
But what we've seen working with companies like yours is there are lots of hidden hangups in that process that drag out when you actually pay.
Even small delays of 2-3 days in getting payments out the door can really add up. Across thousands of supplier invoices over the year, those bottlenecks are costing you big time.
Here's what it ends up costing you:
- Missed early payment discounts from suppliers
- Late fees out the wazoo when payments are overdue
- Cranky suppliers breathing down your neck
- Less cash on hand to invest in growing your business
- Higher borrowing costs to keep things running while you wait on payments
This is a huge - but fixable - money leak! In this guide, we'll show you:
- The 6 biggest bottlenecks holding up your supplier payments
- How much optimizing the process can save you
- Step-by-step ways to speed up payment and regain control of your cash flow
The good news is you can plug this cash drain with some simple tweaks to your systems. Let's get your money working for you again!
I. Manual Document Processing Issues
Let's dive into the first cash flow killer - manual paperwork overload!
Even though you've got slick digital systems handling payments, so many companies like yours still rely on old-school paper invoices to start the process.
These invoices pour into your mail room in stacks every day and sit there in bins waiting for someone to deal with them. AP clerks have to dig through piles to find each customer's account, then schlep the papers back to their desk to type it all in.
With thousands of pages moving through each month, it's no wonder invoices get lost or mixed up all the time. Your people waste tons of time tracking down missing papers or figuring out unclear details before they can even start entering.
On top of that, your AP team has to slog through deciphering complex billing documents and statements just to pull out the right dollar amounts and codes to punch in. It's way too easy for them to input the wrong facility name, product ID, address, or date as they're manually typing everything.
Those mistakes cause headaches down the line when payments don't match up or get kicked back. And as work piles up, invoices just sit there waiting to be entered while your team gets more overwhelmed.
This manual paperwork overload bogs down your people, drags out processing time, and delays getting payments out the door. But there are better ways!
II. Purchase Order and Inventory Reconciliation
Another cash flow killer is when your digital systems don't sync up smoothly.
Procurement records, inventory flows, and supplier invoices often live in totally separate systems. So when an invoice comes in, your AP team has to manually double check that it matches purchase orders and inventory before paying up.
It's very common for mismatches to pop up that stall payments:
- Inventory issues show you've received supplier goods that aren't reflected in your ERP.
- Purchase orders made months ago outline pricing or delivery expectations that end up changing.
- Invoices don't line up cleanly with what was ordered and received.
All this forces your analysts to manually sort through mismatches between systems and hammer out the details.
The result? Payments to your suppliers get held up while your people play audit detective, stretching out the time vendors wait to get paid.
Getting your systems to seamlessly sync up would shave tons of time off this manual verification process. Your AP team could focus on more valuable work, and payments could speed out the door.
III. Approval Workflow Inefficiencies
Now let's talk about another bottleneck - getting everyone aligned to process invoices fast.
Your AP team depends on cross-functional stars - procurement, inventory, finance leaders - to get invoices approved and paid.
But messy handoffs between these silos drag things out:
- Key leaders often get left out of reviewing big invoices tied to their budgets.
- Departments get overwhelmed handling their own stacks of invoices at month-end. Approvals stall out waiting for leaders buried in hundreds of requests.
- Priority rush invoices get lost between systems. No one knows what needs immediate action.
All this misalignment between siloed teams hides invoices that need attention. Approvals sit for days or weeks before your procure-to-pay experts can move forward.
Tighter cross-functional alignment would speed this up tremendously. Setting clear accountability and priorities across departments would get the right leaders reviewing invoices faster.
With less invoices slipping through the cracks, your team could push payments out the door ASAP. Aligned communication is key to optimized cash flow!
IV. Supplier Relationship Impacts
Now let's chat about how these bottlenecks hurt your suppliers and business partnerships.
When payments from customers like you show up late, suppliers take a big hit too.
Small vendors running on tight margins end up paying late fees or financing costs while waiting ages for your 30, 60, 90 day terms. Some suppliers face major cash crunches if your payment delays drag on too long. They struggle fronting money for materials and production without your payments coming through.
In extreme cases, delays even force small producers to halt supply completely when they can't float you materials anymore.
Over time, late payments destroy supplier trust and partnerships. Vendors reduce your credit limit so you can't buy as much. Some cut ties altogether since you've become high risk. They'd rather work with partners who pay on time. But rebuilding stable supplier relationships from scratch is tough!
Optimizing your processes protects partnerships through reliable on-time payments. That wins you loyalty, flexibility, and stability from vendors!
V. Hard Dollar Impacts on Cash Flow
Let's look at the cold hard cash you're leaking from these processing bottlenecks and payment delays:
- Early payment discounts from suppliers average 2-3%. Missing those quickly adds up to hundreds of thousands in lost savings every year. Even tightening things up by a day nets big returns.
- Late fees and interest are just wasted money down the drain. They also signal to your suppliers you're unreliable, eventually destroying flexibility. These penalties steal dollars away from fueling your growth.
- With volatile conditions lately - think interest rate spikes or materials shortages - you've gotta finance late payments with costly short term lending that eats your budget alive.
Optimizing your processing and payments recoups huge hard dollar savings through discounts, eliminates fees blowing your budget, and reduces financing costs.
Regaining control of your cash flow directly fuels business growth and flexibility.
VI. Reduced Visibility and Operational Flexibility
But possibly the biggest danger of messy payment processes is all the uncertainty it creates across your business.
Your budgets and cash flow forecasts get stretched super thin from late payments. That forces departments to put off their own bills while flying blind - who knows if the money will actually come through on time?
Growth stalls too with cash tied up unable to be invested. Your leaders can't confidently commit to new initiatives without reliable visibility into what's actually available, post-bottleneck.
By optimizing your procure-to-pay process, you regain control and certainty over cash flow. Your finance leaders can plan accurately, departments pay smoothly, and growth scales faster with liquidity freed up.
It's amazing how clearing bottlenecks unlocks new potential!
Now let's talk solutions...
Regaining Control Over Cash Flow
You can get control of your cash flow back through some simple changes!
Rationalizing workflows with automation gives the fastest way to recapture days of delays and free up your teams.
Do a solutions audit on your current processes:
- Are folks still digging through paper invoices?
- What clunky integrations between old systems stall things out?
- Where do the worst bottlenecks commonly happen?
- How could smarter connections smooth data flows?
That highlights the best spots for automation to create huge impact - we're talking weeks here with some lightweight cloud tools!
- Invoice scanning instantly extracts info from papers so your people handle just exceptions.
- Smooth integrations sync your procurement, inventory, and AP systems.
- Smart AI takes over routing invoices to the right approvers so managers do their real job.
With your backend humming, suppliers get paid exactly on time. Uncertainty and volatility go away. Your teams get their productivity back. And cash unlocks to put towards growth.
It's amazing what optimizing with automation can do! Regain control of your cash flow and watch your business take off. Let's chat on where to start - the impact for your bottom line will be game changing.