Accounts Payable Insight: Why You Need to Pay Your Vendors on Time

If you’re in finance, you know that vendor relationships are important. From the purchase requisition stage, you’re entering into an agreement that will directly impact your company’s cash outflow.

From my perspective, the key to maintaining your relationships with vendors is managing invoices promptly and accurately. A good accounts payable process ensures you don’t have liabilities on your books for too long. Errors and inefficiency in the AP process can have lasting effects on your company, and missed payments mean more than unhappy vendors—it can mean a loss of service or lack of supply for your business. And that’s not even mentioning the risk of duplicated invoice payments or knowing how hard it is to request a refund after you’ve already paid a vendor.

There are plenty of reasons to pay your vendors on time, both operationally and strategically, and it’s essential that this process is prioritized—for the sake of your team’s efficiency and, most importantly, to avoid any disruptions to your business.

Understanding the Operational Impact of Vendor Payments

A critical aspect of the finance function is keeping your business running smoothly. If you can’t pay your suppliers timely and accurately, you’ll have trouble getting the goods and services you need to meet your business objectives and keep your company moving.

The first step in implementing smooth vendor payments is understanding what areas of the workflow are crucial to your operations.

#1: Vendor Data

All vendor data, such as tax information, banking details, and contact information, should be accurate and complete from the start. Inaccurate or incomplete data can lead to payment delays, compliance risks, and potential fraud.

#2: Tax Form Collection

A secure online repository is necessary to collect and store the proper tax forms. Tax form collection is essential to ensure compliance with varying domestic and international tax regulations. It helps verify the legitimacy of vendors, facilitates accurate reporting of cross-border payments, and mitigates risks related to tax withholdings.

#3: Invoice Management

Duplicate payments are a serious threat to your operations. With high invoice volumes, it’s easy to receive the same invoice multiple times, and it’s difficult for your AP team to catch that when manually managing hundreds or thousands of invoices a month.

#4: Payment Methods

The ability to pay out in multiple payment methods and currencies is a huge benefit to your global vendor base. Many vendors prefer specific currencies and methods, such as ACH, wire transfer, and credit card. However, this functionality can lead to currency conversion risks and higher transaction costs.

When Vendors Strike Back: A Real-World Story

Understanding the operational impact of vendor payments is important, but the next step is evaluating the strategic, human reasons for keeping the process running smoothly. 

I recently asked my accounts payable team to share their previous experiences with unhappy vendors. As you can imagine, there was a lot to unpack, but one story stood out. Tsira Betchvaia, our Accounts Payable Accountant, once had a time when a vendor was so upset with a late payment that they escalated the issue directly to Tsira’s CFO.

The main issue the vendor had was a lack of communication—they couldn’t contact Tsira’s AP department, and the AP team hadn’t received an invoice from the vendor. Once Tsira and the team learned about the issue, they contacted the vendor and provided the reason for the late payment—they never received the invoice. Once the vendor understood, the AP team made sure that the outstanding invoice was processed and paid to the vendor, and remittance confirmation was provided as soon as the payment was released. In this case, communication was the key to building trust with that vendor—and Tsira and the team’s responsiveness mitigated any further contact with the CFO.

AP Automation: A Mutually Beneficial Business Relationship

Although Tsira was able to fix that vendor issue manually at the time, what if the problem never occurred at all? I’m not exaggerating when I say technology is one of the best things to happen to the accounts payable function. Automated vendor payments are not only about keeping up with invoice deadlines, but they’re also about improving relationships—technology is both an operational and strategic play.

The onboarding to payments process is a critical aspect of the AP workflow, and it’s an area that directly benefits from automation. With technology, you’ll improve vendor data accuracy, automate tax form collection, simplify invoice submission, and pay out your vendors in the best way for them. This directly reduces pressure on your vendors to chase payments, decreases the risk of fraud and inaccuracy for your own AP team, and improves two-way communication. Most importantly, this reduces the risk of operational stoppage to maintain a successful supply chain.

For our AP team, nothing is worse than slow processing—no one wants to spend valuable hours manually inputting data. For our vendors, nothing is worse than not getting paid on time. AP automation increases the overall productivity of the entire vendor management workflow and reduces the risk of late payments—no more manual labor, manual oversight, or error-prone tasks.

Happy Vendor = Happy Life

Today, automation gives Tsira and our AP team a jump-start on building great relationships with our vendors. The self-service onboarding process is easier, faster, more secure, and way more efficient for both parties. And if a vendor is facing any issues, they can directly contact our support team and receive answers right away.

With our AP automation solution, vendors can easily track the status of outstanding invoices and receive clear and accurate information. Plus, consistent payments allow us to collect early-payment discounts, and we don’t have to pay any additional late fees. Technology enables us to implement better terms because we have a positive reputation for being a good payer with our vendors, and our vendors are happier with the process—they always get paid on time.

If you have any questions or want to talk further, feel free to reach out on LinkedIn or click the link below to learn how accounts payable automation improves vendor management.