Automating financial processes in the buyer/seller network can eliminate the complexity of buying group transactions.
This blog first appeared on the Corcentric website.
The great Greek philosopher, Aristotle, wrote the famous phrase, “The whole is greater than the sum of its parts.” He may have been talking about science; but this is also an appropriate way to describe a buying group. The strength of the group lies in its ability to aggregate the purchasing power of a collection of independent businesses and leverage that power to receive better pricing and terms on products the individual members of the buying group purchase.
But as technology has advanced, serving the members in a traditional paper-intensive, manually-operated manner is not providing the benefits that could be realized by digitizing the end-to-end, order-to-cash (O2C) processes. The first thing a buying group should do is find a transaction solution provider that understands the complexities involved in managing buying group transactions. Once the solution has been found and deployed, here are the ways the buying group, their members, and their suppliers can benefit:
- Automated rebates – This is the real value of being part of a buying group; the ability to realize substantial savings through rebates. But keeping track of those rebates can be time-consuming and difficult, unless you automate. Since many rebates are tiered, automating the process will enable buyers to know where they are in the tier. It may be that a company, with just a small purchase, can push itself into a higher tier, thus garnering greater savings than they might have otherwise known. As rebates usually are tied to a calendar; an automated solution can alert a company that they may be in danger of losing access to a rebate unless they act quickly.
- Visibility into member purchases – The ability to negotiate better deals with suppliers can be helped considerably by having an in-depth understanding of what members are buying, when they’re making the purchase, and in what quantity; but without digitization, that’s close to impossible. Deploying the right solution will give the buying group visibility into each member’s line-item purchases by supplier in real time. This data may open up possibilities for new product offerings and pricing strategies. It certainly gives the buying group the first-hand, real-time information necessary to allow for a stronger negotiating position.
- Price validation and contract compliance – When buyers are spread out across the country, some with their own multiple locations, it’s essential to the well-being of the group that the pricing one member at one location receives matches the contracted price…and that price will be the same regardless of the member or the location. Deploying an automated transaction solution across the member network will ensure that members are paying the right price, every time.
- Centralization of accounts payable services – When members have to pay each of their suppliers individually, that can lead to hundreds of invoices handled and payments processed every single month. Digitizing of all data, from POs to receipt of goods notification to invoices, makes the process easier. But go one step further and consider the advantages members will realize when they receive all of their buying group purchases on a single detailed invoice and are able to pay all of the suppliers with a single check. This is why it’s important to find a provider that has the capability to manage the entire O2C process
- Streamlining supplier payments – Suppliers also benefit when the buying group’s financial processes go through this digital transformation. Rather than having to send invoices to each member separately, the supplier can deliver those invoices electronically to the solution provider who then will ensure, not only that the invoices are received but that the suppliers will be paid in the agreed-upon timeframe. Suppliers also get full visibility into their invoice status, which negates the need for phone calls and the negative impact on relationships that can result from disputes.
- Eliminating credit risk – Suppliers, large and small, face a laborious task when it comes to checking and assessing the credit risk of each buying group member. Working with the right O2C solution provider, this concern is eliminated since the provider takes on the risk for collection while ensuring that suppliers receive their payments in a timely manner.
The relationship between a buying group, its members, and its suppliers, is built on trust. Reinforcing that trust through on-time payments, guaranteed pricing, increased efficiencies, and an uptick in revenues is invaluable. Buying groups that have digitized and automated their financial processes have turned the relationships into a win-win-win for all involved.
See how your buying group can create a win-win-win for the entire network.