In yesterday's installment of this accounts payable saga, I shared the backdrop of a supplier contracting and on-boarding process involving a larger global organization and our humble but growing publishing and research firm. To pick up where the story left off: with an invoice in limbo, our team finally got hold of our go-between with the accounts payable department who informed us that the regular company terms were “Net 70.” Our contact then told us that he would do what he could to get around this.
Of course we volunteered various options:
- Change invoice date
- Change invoice amounts (and break into smaller invoices to get around any threshold based payment terms)
- Bill different entities or global entities
And of course we figured out a solution to the problem, which I won’t divulge here to further protect the innocent. Throughout the ordeal, our customer lost greater and greater visibility into the procurement and accounts payable process. The result ended up obfuscating the very types of controls and risk visibility that integrated supplier management, contract management, procurement and accounts payable processes and tools are supposed to enable!
Moreover, by attempting to put Net 70 payment terms on small businesses (even after a contract negotiation that agreed on different terms), the company was potentially driving up risk in its supply base, especially in the case of vendors who were not as versed in coaching their customers about the types of workarounds that are possible.
Now contrast this with another Fortune 500 customer of ours, who has put us into a small business program and pays all invoices within 21 days. We are a small but strategic supplier to them. And their team realizes it, having segmented and tiered different classes of suppliers according to importance, size and other factors.
As our series concludes, we’ll offer a few key takeaways for engaging small businesses more effectively as suppliers.