Automating Ecommerce Supplier Invoice Workflow and Communications

The backend operations for ecommerce businesses need to be as optimized as possible to thwart attacks to profit margins. The thinner the margins, the more resolute businesses need to be about operating as efficiently as possible. Organizations rarely focus on an ecommerce company’s accounts payable function and how it interacts with suppliers. Procurement or product curation focuses on the actual product and the vendor as a sustainable partner, but not the fulfillment processes and transactions with the supplier. But for the supplier, those transactions are their lifeblood.

Every ecommerce business needs to address these areas to reduce supplier payment errors and friction. Here are some potential approaches that ecommerce companies can look to adopt to streamline AP processes.

Organizational Integration of Ecommerce and Operational AP

Many ecommerce businesses make it a point to split the invoice processing of those suppliers that are providing products to their customers versus those that are operationally involved in running the company (e.g. rent, bills, etc.). This may seem like a good idea. Ecommerce invoices are on a more critical path.

The split adds complexity. Accounts payable teams will have separate processes to contend with (such as net payment terms, discount factors, payment method variances). Yet this has been the traditional way to pay suppliers as a way to manage cash flows and inventory issues. The problems arise when those two paths become too distinct. Eventually, entire departments are formed for each, yet the paths are mostly parallel with a few exceptions.

There is another solution. Ecommerce businesses can merge traditionally operational AP invoice processing with their ecommerce-focused purchases under one window. This lessens the need to build a distinct organization just to handle one or the other. Every invoice is treated equally with its unique properties determining a proper digital path. That’s the key. Invoices must be digitally captured and routed to support a single supplier payment flow.

This combined model provides greater visibility and control around what funds are leaving the organization and how suppliers are managed.

Supplier Invoice Workflow

An invoice from a supplier goes through many paths to become payable. The determination for payment comes from several attributes:

  • Supplier identity and validation
  • Net payment terms (due dates)
  • Invoice owner (department approval routing)
  • Payment methods (e.g. check, wire transfer, ACH/direct deposit)
  • Shipment / Delivery information
  • Early payment and other discounts

The organization needs to map out the necessary approval workflows for invoices and payments. In addition, the invoice needs to be accepted in either a digital format or scannable by optical character recognition (OCR) software. Then fields from the invoice will drive the necessary routing and scheduling. Ideally, the supplier has also provided their preferred payment method information. A supplier self-service portal can minimize the workload for AP to hunt down payment method details and invoice upload.

Proactive Supplier Communications

Communications with suppliers during the invoice-to-pay process, particularly for ecommerce companies, is incredibly important. Many accounts payable departments, because they’re deeply entrenched in other processes, fail to notify suppliers about payments. Instead, they respond reactively to triage payment inquiries and issues when the supplier calls on them to do so.

To build a trusted relationship with the supplier and minimize the distractions on AP, there are key points where proactive communications are critical.

  1. Supplier Onboarding – collecting contact information, payment method preferences and bank account details, tax identity collection and validation, and first invoice submission.
  2. Invoice Reception – notify the supplier that their invoice has been received.
  3. Payment Sent – notify the supplier that payment of a certain amount was sent via their selected payment method. Ideally, indicate the time it takes to land in their account or possession.
  4. Payment Issues – notify the supplier that there was an issue with attempting to pay them for an invoice. Ideally, that would include steps to remedy the issue (bad bank account, returned paper check, failed wire transfer, etc.).

ERP Integration and Reconciliation

Was an invoice paid? Did an invoice get duplicated? The ERP or accounting platform ecommerce businesses use are supposedly the record of truth for company transactions. But they still require that some manual effort to reconcile that information because of the way payments are executed through banks. This can cause a lag in processes and expose the company to additional errors. It also limits the visibility the business has around their cash situation.

Any automation solution involving supplier invoices need to provide a way to either integrate directly with the ERP platform for payment reconciliation. This can be a direct integration or a batch upload method for ERPs that must be “firewalled” from external connectors. That “real time” information also has the side benefit for making financial close of supplier payment records much easier (and often).