Making late payments to your suppliers can affect your business reputation. Early payments could lead to issues when suppliers default on delivery. As such, knowing how to manage suppliers and payments effectively is important for smooth business operations. Read on for some tips on the process.
Types of suppliers for a business
Depending on your business model, you could use the following types of suppliers:
- Wholesalers and distributors: They purchase goods in bulk to resell in lower quantities at higher unit prices. However, they may not accept smaller orders.
- Manufacturers & Vendors: these types of suppliers accept small orders. However, their prices may be higher than those of wholesalers.
- Import Sources: just like domestic wholesalers, Domestic importers can sell foreign goods to businesses.
How to manage suppliers and payments
Typically, businesses have a primary goal of fostering long-lasting relationships with dedicated suppliers. Here are some tips on how to do this.
Understand your supply chain
First, you may use the right technology to understand your supply chain. For instance, data analytics are used in procurement departments today. It can help them re-organize supplier payment processes so they are more efficient and cost-effective. In addition, data analytics can lead you to develop the appropriate payment solutions for different suppliers.
After all, you may find out that early payments may generate some savings for you with certain suppliers.
Automate and streamline payment processes
Second, you could use embedded payment details in purchase orders to execute payments upon fulfillment. Specifically, you could implement this model for repeat orders. For instance, there are platforms that allow businesses to make card payments and bank payments using virtual digital payment cards. Good examples of such platforms are supplier management software.
Keep your suppliers in the know
Third, it would be in your interest to treat your suppliers like your partners. Your relationship should not be limited to just financial transactions. There should be open two-way communication. They should know about your processes and you should listen to their concerns. Most importantly, when you are not able to make timely payments, inform them promptly.
Place emphasis on quality service and value over price
In addition, you should prioritize the value you get over the price you pay. Perhaps, you can gain a bigger discount for buying in bulk or paying earlier. Leverage on that. However, keep your inventory management best practices in mind. In the same vein, getting quality services and materials may help you grow your profits more easily.
Ensure a clear and detailed supplier agreement
Meanwhile, it is very worthwhile to have a strong supplier agreement contract. This is even more important if you do repeat business with a supplier. Such agreements should cover mutual expectations, service descriptions, price, delivery terms, payment terms, and so on. Remember, each party has to sign it.
Ensure due diligence and evaluate risks
Furthermore, ensure proper evaluations and risk monitoring if you are dealing with a new supplier. For example, you may ask for references or a history of previous work done. In addition, you need to check if they are competitively priced.
How to manage supplier disputes
Remember, you should have a supplier agreement. It is your first check when there is a breach of terms or needs for a dispute resolution. Typically, the contract should outline a dispute resolution process. Otherwise, you could take the following steps:
- Discuss the issue amicably with the supplier and reach an agreement.
- Follow up the agreement with an email or written letter that outlines what was agreed on. Ensure both parties sign it.
- However, where you cannot amicably negotiate a resolution, write an official letter of complaint. Give enough time for a response.
- Thereafter, you may seek advice from a relevant industry association or a dispute resolution body. Besides, there are lawyers or private businesses who can advise you.
In summary
Ineffective supplier management processes can make your business less efficient. This could be in terms of time and money. Implementing these tips on how to manage suppliers and payments can smoothen your business operations. Likewise, you can maintain vital supplier relationships.
