Suppliers Need Better Financial Visibility to Weather Sustained Disruption

Of all the innovation and digitization across the supply chain, there is one area that remains fairly analog: supplier payments. Suppliers often must tolerate the burden and risk of outdated payment processes and technologies. But widespread disruption is revealing fault lines as suppliers’ operations fall out of alignment with buyers’ demands. It’s time for business-to-business (B2B) payments to start working for both sides.

Many companies are hopeful about growth in 2022, but their suppliers may not have the same optimism. According to a survey by the Institute of Supply Management, more than 30% of businesses are concerned about increased risk to tier-1 suppliers, and nearly 60% are concerned about supply slowdowns. It’s been reported that supply chain disruptions caused more than $4 trillion in lost revenues in 2020 alone.

It’s time to acknowledge the stark reality that much of this loss has been on the back of suppliers. Times are tough — supply chain slowdowns, demand fluctuation and labor shortages are all negatively impacting cash flow for buyers and suppliers alike. The pressing issue comes from the fact that suppliers are not only dealing with their own cash flow challenges, but also delayed payment from their customers.

These factors are driving many suppliers to seek ways to improve cash flow forecasting. Historically, this has been difficult because suppliers have had limited — if any — visibility to what happens to an invoice once it’s submitted to the buyer for payment. Is the invoice approved? Has it been approved for the right amount? When will it be paid? Is it a candidate for early payment? Where is the remittance advice report for a particular invoice?

Chasing down the answers to these questions is a heavy burden for a supplier’s accounts receivable (AR) department. The process is manual, resource intensive and prone to errors that can make cash flow forecasting very difficult.

In response, many suppliers are demanding real-time visibility into early and on-time buyer payments. This has brought forth a new generation of tech-enabled B2B payment solutions that prioritize supplier payment transparency and efficiency. They give suppliers instant visibility into specific invoices, the ability to track invoice status and approvals (as well as remedy any errors before an invoice is paid), and real-time transparency into cash flow forecasting. Through these solutions, suppliers can streamline AR reporting and audit trails as well as improve overall AR efficiency.

Outlook:

Accurate cash flow forecasting will be more important than ever to suppliers in 2022. Critical business initiatives are on the line, such as upgrading infrastructure to accommodate buyer demand and tackling persistent labor shortages. That said, improvements to cash flow forecasting can’t happen without better visibility into payments and improved AR efficiency — and suppliers will begin to rely even more heavily on tech-enabled B2B payments solutions to make that happen.

This article was originally published on SupplyChainBrain.