Buyers and suppliers negotiate contracts all the time. Sometimes they are in the form of purchase orders that must be accepted when received. At other times there are lengthier general contracts involved that are negotiated before a purchase order is ever sent. These contracts are often produced because there is an expected level of risk for the buyer. They may also be negotiated because the buyer hopes to set up a long standing relationship with a preferred supplier.
These contractual terms are meant for the protection of the buyer, but they can slow down the process of accounts payable transactions. Even a simple purchase order can contain lengthy terms and conditions, especially if it is set up for a supplier that has never been used before.
No one enjoys reading over terms and conditions. Suppliers may reject them out of hand if they are too long, and buyers must take extra diligence to be sure the initial contract terms are adhered to. When they are not, businesses lose money.
Although a legal team is usually involved in the production of such contracts, when accounts payable is handled manually, there may be errors in contract adherence that are never caught. Since establishing business contracts in itself can be expensive, care should be taken to make certain that this expense does not go to waste.
Automating Business Contracts with Suppliers
One of the benefits of accounts payable automation is that existing business contracts with suppliers can be archived online. Standards can be set in electronic invoicing so that there will be a computerized check of all purchase orders and invoices generated, to make sure that they comply with contractual terms.
The process becomes an automatic one, not relying on the memory of a department head or the line-by-line scrutiny of department personnel. Because computers make less errors in matchups than human beings do, this can save the business a lot of money over time. This does not even take into account the legal headaches avoided that can occur when contracts are not followed.
Because discrepancies occur in real time, there is another advantage to e-invoicing. Any lack of adherence to contract will be noted as an exception, and can be handled when it occurs. Problems can be dealt with as they happen without a long lag time in between. The accounts payable process will be shorter and more efficient as a result, allowing businesses to better control their working capital.
Contractual terms for dynamic discounting of invoices can be entered on computer for each supplier, allowing the buyer to compare the terms of suppliers and choose those that work best for their needs. AP automation gives the buyer a better method for reviewing statistical data on supplier relationships, making future negotiations with suppliers easier and less strained. Since dynamic discounting benefits the supplier by assuring that invoices are paid early, automation of these processes can assure that contracts are not only followed, but followed on time.
Today’s business relationships stand or fall on the existence of contractual obligations. Accounts payable automation is set up to enhance the terms of even the most detailed business contract.