Keywords: electronic invoicing, e-invoicing, einvoicing, Ford, CMI, administration, procure to pay, purchase to pay

Supporting your suppliers makes financial sense

Susie West | News | 2 May 2012

• Print
•        

As a large organisation you may be dealing with thousands of different suppliers, but chances are there are one or two you rely on heavily for a large proportion of your goods or services.

Think about what would happen if one of them went bust? How would this affect your business?

Ford found out this week when CMI, a company supplying suspension parts for its vehicles, was placed into administration, leaving the carmaker with a shortage of stock.

It was subsequently forced to halt production at its Geelong and Broadmeadows plants, standing down 1,800 employees as a result.

Receivers for CMI are hopeful that operations at its factories can resume after the weekend. However, it will need to operate for at least 24 hours before Ford's production can continue.

The lesson large organisations can learn from this is that a supplier failure can have a damaging impact on business, especially when it is such a critical one.

Of course many suppliers are struggling to keep their heads above water at the moment, and the situation looks unlikely to improve given the ongoing economic uncertainty worldwide.

As a big buyer, one of the best things you can do to support your smaller suppliers is to pay them on time, or even early, and of course e-invoicing is one way to ensure that payments are made on time and that time-consuming errors are eliminated.

But besides the knowledge that you are giving your suppliers a helping hand at a difficult time, there may be other advantages to you in settling invoices in a timely fashion.

Many organisations are making use of dynamic discounting to agree discounts on the goods and services they procure, in exchange for early payment.

This works especially well for companies sitting on large cash reserves, as it enables them to generate higher returns than they would leaving their money in the bank or investing in other assets like stocks and shares.