Working together to create a new, better normal in supplier relationships
Given the current landscape, just how valuable are strong supplier relationships? Last year, Barclaycard research revealed that 7 in 10 businesses were looking for relationships with staying power – including those with their all-important suppliers.
Fast-forward to 2020, and the current climate has made preserving those relationships more important than ever. With establishing mutually beneficial supplier relationships so integral to business operations and processes, how should businesses seek to nurture them?
What we used to call “purchasing” is now – quite fittingly – known as a “relationship”, implying a two-way transaction as opposed to a one-way transaction. With COVID-19 putting pressure on certain vulnerable areas of the supply chain, it is crucial that businesses take this opportunity to prioritise relationships, and treat the supply chain as an ecosystem requiring care every step of the way.
When it comes to driving growth and identifying chain inefficiencies, Maria Parpou, Head of Product at Barclaycard Payments, explains, “Clunky supplier payments processes mean that businesses of all sizes are losing out on time and money. By implementing simple quick fix solutions now and embracing more high-tech approaches in the medium-term, companies can maintain vital supplier relationships, futureproof operations, and ultimately keep smaller companies afloat. In a time of such challenging circumstances, implementing these measures has never been more important.”
With findings from the Federation of Small Businesses (FSB) stating smaller businesses “have seen their payment terms lengthened or cashflow held up as their bigger clients try to insulate themselves from the impacts of COVID-19”, SMEs are at higher risk should supply chain management not receive the attention it deserves. Here, we look at five tips designed to help both organisations and their suppliers work together to streamline these relationships.
Low-tech fixes (for faster payments)
With cashflow a major concern for SMEs at any given point, getting paid on time could mean the difference between staying afloat and going under. Yet despite the urgency surrounding this process, research shows it can take up to three weeks between a business receiving and paying an invoice. Larger companies should therefore identify which suppliers need to be paid first by fast-tracking their invoices. While this can’t be fixed overnight, the shift to card payments can offer a quick solution to accelerate this process; for supplier businesses themselves, this also means switching from an invoice system that relies on bank transfers to one that accepts card payments.
Altered payment terms
Time is of the essence when it comes to payment, so much so that late payment figures rose to £23.4bn by the end of last year (before the pandemic began). FSB national chairman Mike Cherry explained: “Sadly some unscrupulous corporations are trying to inoculate themselves from the impacts of COVID-19 by withholding payments, or even freezing them, at the expense of small businesses.” To help avoid this detrimental backlog, larger corporations – especially those having received Bank of England-backed finances – have been asked to consider supporting their small suppliers by settling their invoices within one month.
When it comes to supply chain management, communication is key – now more than ever during times of crisis. Businesses and their suppliers should therefore transition to a more collaborative and transparent process that works for everyone. Not only does this enable greater visibility for all parties involved, but improved practices also allow the suppliers themselves to identify problems sooner that may affect activity later down the line. The tracking and monitoring of stock for example, even through the distribution and transport stage, can allow managers to streamline processes across entire networks – with order fulfilment dramatically improved as a result.
Harnessing data analytics
For a comprehensive view of the bigger picture, data analytics can help businesses better understand the supply chain – and find cost efficiencies by doing so. Barclaycard Payments can assist procurement departments in finding the right payment solutions for different suppliers. By combining account data points with third parties such as Company Watch, businesses can organise their suppliers based on multiple factors – from the number and value of transactions to whether an early payment can help generate savings. Not only can this help businesses save time and money, but it can also help leaders make more informed decisions based on the data in front of them.
Updating your toolbox
While digitalising supply chain procedures to improve efficiency is one thing, the automation of procure-to-pay processes as and when orders are fulfilled – with payment details already embedded within the purchase order – can help transform the way businesses operate now and in the future. Barclaycard’s B2B platform Precisionpay is already making it easier for companies to pay their suppliers, even enabling same-day payments. By creating their very own virtual digital payment cards, businesses can make card payments to those that accept them (and bank payments to those that don’t) – all while benefitting from the cashflow perks of a card product.
So, what should be top of the list for businesses now? While growth is of course of paramount importance, the way in which existing relationships and processes evolve could help companies futureproof their offerings. Maria Parpou adds: “As we navigate our way through this difficult period, improving and streamlining your business’ payments processes is the most important thing you can do”.