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Creating Realistic Vendor Expectations and Improving Relations in Difficult Situations

Improving vendor relations is an issue that rarely gets addressed in accounting and accounts payable circles. This is unfortunate because good relations with vendors usually translates into less work in accounts payable. And of course, less work means an improved bottom line. It also causes less stress and aggravation for those who have to deal with suppliers on a regular basis. Let’s take a look at ways to improve less-than-ideal supplier relationships. At the conclusion, we’ll review some basic best practices that will set the framework for good relations with all suppliers.

Of course, astute readers will note that if invoice automation is used, some of these problems will disappear.

The Situation

Realistically establishing vendor expectations and requirements. If they know what you require in order to pay them in a timely manner, they are more likely to supply that information. However, this information is often not provided to the vendor.

The Solution

The best way to start a relationship is to make sure the vendor knows what is expected. Organizations that send either a welcome letter or new vendor pack have the right idea. However, not many organizations send this information. So, it is then imperative that as items are missing, the accounts payable department let the vendor know in a very polite manner. A few organizations will send an annual letter to all suppliers, informing them of any changes. If your organization sends an annual missive to vendors, usually to remind them of gifting policies or limits, you could include information there, if it was short.


The Situation

There’s a problem because your organization has decided to stretch payment terms and some of your vendors are not happy about this.

The Solution

Of course, the easy solution is to pay according to the original payment terms. But for most reading this, that will not be an option. The best approach here is to be honest with vendors from the start. Will they be unhappy? Absolutely. But, their displeasure will be less if you are upfront with them rather than if you try and sneak it through hoping they won’t notice. A few might not say anything, but by and large, this will hinder good vendor relations.


The Situation

There’s a problem because your organization has decided to stretch payment terms because money’s tight.

The Solution

The best approach here is one that management will, in most cases, forbid you from taking. Again, we’re talking about honesty. If management is willing, explain the situation to your vendors and explain that as soon as it is feasible you will return to your old payment practices. In most cases, management will not be okay with you sharing this information with suppliers. So, this might be one case where the relationship with vendors will become a little frayed and there’s not much you can do about it.


The Situation

There’s a problem because the invoice was lost in AP. It happens, hopefully only on very rare occasions.

The Solution

When this happens, own up to it, apologize and then get the vendor paid as quickly as possible.


The Situation

There’s a problem because purchasers are slow in reviewing and approving the invoice.

The Solution

If it’s a one-off incident, apologize and move on. However, if there is an ongoing problem with one or more purchasers who drag their feet when it comes to reviewing invoices then you need to take more drastic action. You can start by talking to the purchasers in question and if that doesn’t work move up the chain. Some organizations have had success with sending automated reminders.


The Situation

There’s a problem because someone (who shouldn’t have) has promised an early payment.

The Solution

Once you’ve verified that the person did in fact make the promise, you have two courses of action:

  1. Apologize and explain the organization’s policy and that your hands are tied and you can’t make the early payment or,
  2. Make the early payment and explain this will never happen again.

In either case, a discussion should be had with the person making the promise to make him/her understand this was a one-time favor and if it happens again the matter will be escalated to upper management.


The Situation

There’s a problem when you inherit a situation where the relations are prickly. Typically, this is a result of years of bad blood on both parts.

The Solution

First, recognize that Rome wasn’t built in a day and it will take some time to repair the relationship. Begin by being polite and responding to their inquiries in a timely manner. Adhere to your end of the bargain. This means paying on time and offering explanations when there is a short payment.


The Situation

There’s a problem when invoices aren’t sent to the right location within the organization making it difficult to pay on time.

The Solution

This is a fairly simple problem and should be easy to fix. Since the vendor clearly hasn’t gotten the information on where to send the invoice, you’ll need to get them that information. Getting this information into the right hands is not necessarily a walk in the park. It needs to be given to the right person in the vendor’s billing department and they need to update their records. For if they don’t, the next invoice will also go to the wrong place. You will also want to make sure that everyone in procurement not only knows where the invoices should be sent but also is giving that information to all their suppliers. You’ll want to make sure it isn’t your own purchasing team that is sabotaging the delivery of invoices by instructing their suppliers to send them the invoice.

Vendor Relations Best Practices

Establish a policy of responding within a given timeframe, say 24 to 48 hours AND stick to it, even it is to just say, “We’re still researching the matter.” Make sure your vendors know what your payment policies are and when they can expect to be paid. If you have access to or the ability to create an online portal where vendors can check the status of their upcoming payments, make sure all your vendors know how to use it. This not only reduces the number of calls coming into the accounts payable group, it improves the vendor relationship.

Mary S. Schaeffer, a nationally recognized accounts payable expert, is the founder of AP Now, a company that creates business intelligence on all issues impacting the accounts payable and payment function. She is the host of the AP Now Podcast.

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