Managing vendor payments is a task that requires more time and effort than most business owners realize. But because recurring expenses keep your business going, it’s well worth the effort to optimize. However, between SaaS subscriptions, contractors, equipment, supplies and more, it’s incredibly easy to lose sight of who you’re paying and how much you’re spending.
To make matters even more complicated, vendor management and vendor risk management only gets more thorny as you scale. And manually paying invoices risks damaging vendor relationships with late payments. It’s a tricky situation that all SMB owners want to take control over. But streamlining your vendor payment systems, on top of your mountain of responsibilities, can feel unmanageable, especially when you’re focusing on scaling your business.
Luckily, there are ways to anticipate and avoid vendor payment issues entirely. In this article, we’ll discuss common vendor payment pitfalls and explain how you can streamline your processes to gain more control over your business spending.
Common vendor payment issues
If you’re not experiencing any vendor payment issues, it’s for one of three reasons. Either you’re on top of your game, your business is still growing, or you haven’t caught the problems yet.
No matter where you are in your journey, being aware of potential challenges will help you identify and avoid complications. Let’s dive into hitches that can have the biggest impact on your business.
Lack of visibility into vendor spending
As you add new tools into your tech stack and establish new partnerships and teams, it becomes harder to keep track of renewals, duplicate payments and “double-dipping” on subscriptions (when two teams sign up for separate accounts on the same service).
This is especially true if spending is happening across several cards and accounts.
It’s even tougher, or close to impossible, to gauge how much value you’re getting out of each service. How can you reliably identify opportunities to downgrade or save costs when some business expenses are out of sight?
Security issues & interrupted service
Imagine you have all of your subscriptions neatly organized onto one card—and then that card is breached. You call your card issuer and the money is refunded, but they have to send you a new card. What happens to all of your subscriptions?
Now you have to take time to reach out to all of your vendors and update your billing information—tasks like these can quickly turn into hours of lost productivity.
Centralizing payments is important for gaining control over your business finances, but security issues are one of the biggest pitfalls.
Frequently late payments
Delaying an invoice or two during the holidays is one thing, but chronically paying bills late results in interrupted services, upset contractors, and late fees. No one wants to be “that client.” Reputation travels far in the SMB community and paying all of your vendors on time is a sign of respect and a well-run business.
Out-of-control zombie spend
What is zombie spend? Put simply, it’s what happens when you or your team signs up for a subscription on autopay and forgets to use it.
There are several reasons this might take place. Sometimes it’s because you’re testing out solutions and forget to cancel the ones that didn’t work out. Or maybe a tool that was relevant to your business last year automatically renews an annual subscription (the worst type of surprise).
These situations get the best of us and they only multiply as you add people to your team and expand your SaaS solutions.
Solutions to improve the vendor payment process
The good news is that these common issues are avoidable. In the long-term, implementing vendor management best practices will save you from the headaches of chasing after your subscription dollars and apologizing for late payments. In the interim, here are some solutions to help you solve your vendor payment issues.
Gain visibility with centralized payments
The easiest way to gain visibility into your vendor payments is to keep your spending in one place. This gives you a full picture of your business finances and protects you from needing to consolidate all of your bookkeeping later on. Whenever possible, choose payment systems that allow for multiple ways to process payments, including credit cards, ACH payments and checks.
Prevent security issues & service interruption with a virtual card
Virtual cards are uniquely generated credit card numbers that work for online purchases. They are associated with your physical card but provide more security because each number is associated with a specific purchase. This gives you ultimate visibility into and control over your spending, as individual numbers can be frozen without affecting other subscriptions.
Better yet, look for a virtual card that allows you to create one-time payments for vendors. This way, if your card is ever breached, you only need to worry about reaching out to that single vendor instead of dozens.
Pay bills on time with automatic bill payment
Some bills come in like clockwork.
Predictable invoices for expenses like retainer agreements and rent payments are great candidates for automatic bill payments. If you know that you will need the service or product for the foreseeable future and you don’t expect the amount to fluctuate, you’ll save time and stress by setting up a secure automatic bill payment.
Combating zombie spending in the vendor payment process
We mentioned zombie spend above as one of the biggest challenges associated with vendor payments. And while one $100 payment for SaaS you haven’t used in months doesn’t seem like a big deal, over time, these issues can compound.
What started out as a single charge turns into dozens of tools that you don’t even realize you’re paying thousands of dollars for a year. To that end, here are some solutions to help you with zombie spend in your vendor payment processes.
Negotiate for new payment terms or switch vendors as needs evolve
As your business grows, your needs will naturally change with it. When you’re negotiating with vendors, make sure you know where you stand in terms of spending. If you’re one of their bigger clients, they’ll want to keep you. If you decide you’re not getting enough bang for your buck, consider switching to a better fit.
Implement a review & approval process for all vendor bills
Monitoring expenses across teams gets hectic, especially when communication is happening via video-conferencing, email, Slack, Teams and more. If you don’t have a clear process for reviewing and approving spending, you might not catch unnecessary expenditures until it’s too late.
Luckily, you don’t have to wait until the end of the month to get visibility. Real-time expense management, allows you to see what’s happening in your business minute-by-minute.
Digitize invoices & contracts
If you receive paper invoices, scan and upload them into the same system where you’re receiving digital invoices. Keeping all your invoices in one place allows you to track whether each invoice is accurate and if it’s been paid. This simplifies workflows and prevents back-and-forth between team members.
Similarly, storing contracts digitally keeps you organized so you can see payment terms and details at a glance. Being able to pull up information quickly equips you and your team to negotiate terms, catch inconsistencies and make necessary transitions.
Conduct regular audits
While finance automation platforms give you the power to monitor every transaction, you probably have better things to do than constantly refresh your screen. But you’ll still want to regularly track business expenses so that you can properly evaluate your profit & losses, find opportunities to streamline spending and prepare for tax season.
A good rule of thumb is to sit down at least once a month to review your accounts.
Streamline vendor payments and ensure transparency with Ramp
With Ramp, all of your vendor payments happen in one platform. Instead of guessing what you owe and when you owe it, you’re given a dashboard with past, present and future insights. Simplify your business spending with automated expense reporting, bill pay and real-time alerts for out-of-policy spend.
Want another reason to use Ramp? Our Buyer team will save you even more money by negotiating your software contracts for you. This service is free for all Ramp customers and the average savings per contract is 27%. Get started with Ramp today.
