Training and support with the suppliersIt is important to spend time with the suppliers to explain the concepts behind a dynamic discounting program. As well as the training for the operational management of the solution, the supplier may well need support with enabling efficient electronic invoicing processes. It is essential to educate suppliers on the benefits the discounting solution can offer to gain buy in, and it is equally essential to ensure they have the processes and technology in place to facilitate the discounting options.
Supplier relationship management (SRM) changeCreating the necessary collaborative relationship with your suppliers requires a cultural change more than anything else. Whilst everyone talks about negotiations being more than just money, it is amazing how the measures around this all boil down to only money. A client of ours recently embarked on a full SRM programme, recognising that through this they could mitigate risk in their business and inspire their suppliers to innovate for them. With this new spirit of collaboration they posed the question to their suppliers – what can we do for you – the answer was a pretty unanimous “pay us on time”. Think carefully about the terms, ensure they are actionable, and then STICK to them! In our experience this is the quickest way to build up good faith, and to develop the transparency and collaboration between all parties that make discounting solutions a success.
Change management for the requisitionerNot only do you need the procurement function and AP functions to buy into this, but you also need anyone involved in the receipting of goods and services and/or the approving of invoices to recognise the importance of timeliness in this process. To make discounting options a success all individuals involved need to fully understand their role and the time sensitive nature of the operation: if there is no invoice ready to pay then there will be no opportunity.
Treasury buy-inThe key stakeholders in any initiative such as this are those responsible for treasury within the business. They decide how best to balance the cash within their business, the threshold at which they would seek outside financing and the bottom line savings they can make through paying early. They must also work with Procurement to decide the interest rates to offer out to certain supplier groups from which the discounts can be determined. Treasury can represent the greatest blocker to change within your organisation if not engage early enough, however once they feel ownership of the project they can also be its greatest proponents. Make sure to bring them in right at the start of proceedings and listen to any concerns they may have.
Technology vendor selectionHowever having said all this, the above steps are irrelevant if you do not have the procurement technology you need in order to facilitate discounting processes.
- eInvoicing will be essential for any of the buyer driven solutions. It is important to rigorously challenge your AP function as to whether they really are operating purely electronically.
- A portal for collaborating with suppliers will be essential for any form of dynamic discounting.
- A portal for bringing in the 3rd party financing is essential for Supply Chain Finance Plus.