AP Best Practices Series - Vendor Management

We recently had a discussion with a very large company about Vendor Management that reminded us of just how daunting it can be to maintain the company vendor database.

Simply managing the vendors can be overwhelming. With more data mining and BI software available, companies are now beginning to understand how they interact with their vendors. This information can then point them then in the right direction as they seek to expand their Electronic Accounts Payable Program (EAP) and leverage vendor relationships for maximum discounts.

From the vantage point of having more information and knowing that it is best to pull such vendors into an EAP, how does a company collect the ACH instructions from the database of thousands of vendors?

Companies may wonder: Who will call the vendors; Who will collect the ACH instructions; Who will key data into the Accounting or ERP system; How will we keep this vendor data secure... and the questions of security could go on. This may lead them to believe that migrating to E-Payments seems to be more work, not less and without the time, resources and the budget to address the migration that it's best to keep business as usual.

To address this problem, Vendor Management Services exist to help collect data and many offer access to vast databases of corporate ACH instructions. Others provide one-to-one communications designed specifically for your vendor database. Others combine a communications program with a web portal allowing a vendor self-service model to collect ACH deposit instructions.

Any of these programs may work for your company but most come with hefty up-front fees or reoccurring monthly fees.

When researching vendor enrollment services, keep the following goals in mind:

A company should own its vendor database at the conclusion of its vendor enrollment program. These are individual relationships that are unique for each company. Keep control of the database!
Seek a vendor management service provider who can streamline communication and launch your E-Payment program in 90 - 120 days.
Work with a company that will help your company analyze its vendor database then set a goal of converting 30% of your overall vendors, but 60% of your most frequently paid vendors, to ACH.
Do not require a significant change to current AP processes to make the move to ACH. Seek a program that allows you to issue electronic payments even when/if your accounting system can only issue a check file.

Vendor management and vendor data collection and analysis may discourage or dispirit.