Supply Chain Risk Management: Setting up a Successful Vendor Compliance Program

While we would all relish a world where suppliers’ operations and tax filings were in perfect sync and no compliance errors were possible, the reality is that companies rely on internal vendor compliance programs as an essential part of successful vendor management. Without a formalized vendor compliance policy, a company will find itself at risk of non-compliance by vendors leading to costs for the buyer.

Some of these costs are obvious direct business costs, such as late delivery, improperly routed shipments, shipments filled with the wrong product (which can create backorders and increased transportation costs), or unauthorized replacement items for existing orders. Other costs may not be immediately clear, but are just as extensive, including labor (for time spent tracking down missing information or items) and additional packaging, shipping, and handling.

A solid vendor compliance program is essential for using high-tech supply chain management tools, including just-in-time inventory systems, Advance Ship Notice (ASN) programs, source marking/ticketing, and RFID. And, more importantly, it will help mitigating time lost on chargebacks, disputes, and recovery claims.

Many vendors may chafe at the paperwork requirements and perceived hassle that comes with comprehensive compliance requirements. In turn, this can cause concern internally for your staff, who have likely spent a lot of time and effort building strong vendor relationships.

You can assuage fears on both sides by crafting a vendor compliance program focused on reducing costs, improving customer service, and maximizing value. To do so, you’ll need a vendor compliance policy that explicitly and clearly explains compliance requirements and expectations, and potential consequences of non-compliance. By focusing on the areas of greatest concern, you’ll be able to eliminate confusion and miscommunication and support the development of even stronger relationships with your suppliers.

Challenges in creating a Scalable Vendor Compliance

Lack of awareness

New regulations, particularly E-invoicing require adaptability to digital technology. Some suppliers might not even attempt to try e-invoicing due to lack of awareness or understanding to learn the new process and technology.

Responsibility for supplier relationships

Promoting internal compliance and e-invoicing compliance, increasing the degree of automation of accounts payable and advocating for new technologies and processes is not easy. Your purchase team will need to juggle multiple priorities and while at the same time maintaining strong relationships with your vendors.

Different compliance requirements for different geographies

Complex local markets have unique requirements and requires on-the-ground, local know-how, which is often hard to come by for vendors with international operations and buyers. It requires significant time and energy, and often requires the overcoming cultural and language barriers as well.

Internal resistance to change

Within the company, as in the case of any change, there can be resistance in the departments involved in the PO to Pay process. In order to lead e-invoicing projects to success, many valid concerns need to be addressed.

“Too Much Technology”

It us very often the case that in addition to the core ERP, companies have multiple other cloud and enterprise software solutions handling a narrow set of functions along the PO to Pay journey. Purchase order may be created and tracked in one system, communication may happen with vendors “offline” on email, and reconciliation of Invoices with POs may be manual due to differing formats and systems.

It then makes sense to have a single system to automate many of these tasks, apply compliance rules automatically, and allow your team to focus on vendor relationships and more strategic activities. CashFlo’s Invoice Discounting platform offers automation across the entire PO-to-Pay journey. It allows you to digitize your Entire Procure-to-Pay Journey, from the first Purchase Order through Invoicing to the final payment on a single platform. With a common ledge, automatic reconciliation, custom workflows and approval paths, CashFlo has been designed to mate perfectly with any companies PO to Pay cycle. CashFlo is also a registered GSTSP (GST Suvidha Provider) and provider E-Invoicing Compliance from day one.

Whatever challenges your organization may face with vendor compliance and E-Invoicing, it is best addressed in a holistic manner, using communication, technology and strong processes. As new requirements come up, automation increases, the willingness of regulators to look at non-compliance with a lenient eye is dropping every day.

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