#BQs – Are suppliers more or less important than customers?

Back in 1928, the John Lewis Partnership Founder John Spedan Lewis wrote, “The Partnership’s relationships with its suppliers must be based, as with its customers, on honesty, fairness, courtesy and promptness.”

Today JLP is held up as the business example of how to treat employee’s, customer and suppliers alike.  But more than likely the centre of your attention is your customer and their relations and you’ll do anything to please them.

But what about your suppliers?

It doesn’t matter where your organisation excels, there is one thing that we all need to get right, business relationships!

And how these relationships are managed directly determines your business success, whether its improved revenue, cash flow, purchasing power or product quality, reputation management and branding.

And for most CFOs, suppliers are not top of mind but some of the most critical insights into transactional risk is actually hidden in your supplier ledger and supply chain relations.

Let’s have a look at the measures you could take to know your supplier better, and the risks and rewards buried in your supplier data.

 

1. Supplier-related risks

What can my supplier ledger tell me about relations, you might think.  And why is it such a concern for the CFO? In short, it is about managing risks, and excelling in it, which is the CFO roles.

Risks like fraud prevention, invoice disputes, contract compliance and capital leakage are all related to the supplier registry and worth your attention.

In addition to risk management, supplier ledgers can easily become unmanageable if inefficient.  Aiming for a optimal and accurate registry is of course much easier to navigate for everyone.

Other finance issues might arise from poor monitoring (ie: possible insolvency or credit risks that changes over time) and not keeping a close eye on your suppliers.

 

2. Think small

Too many companies have thousands of suppliers in their registry, but with only a fraction of these that could be regarded as active partners.

The definition of an active partner may vary, but most would agree that a company that you haven’t done business with for the last few years surely wouldn’t count as an active partnership.

It is also all too common that the same supplier is registered multiple times, but under different names and with outdated information. Acme Ltd, Acme Partners Ltd, Ltd Acme.

Whats the overall risk to this supplier? How do we track missing invoices or delivery’s? Which one should I choose?

 

3. Housekeeping

So the final step in this practical crash course in digital transformation of financial processes is the importance of cleaning up and continuously maintaining your master data.

Step #4: Know your suppliers

  • Map roles, processes, and software involved in managing your supplier registry
  • Determine which characteristics a supplier should have to qualify as active
  • When, how should a supplier’s status be changed? Align with processes and tools
  • Assess financial risks related to your suppliers; e.g. credit rating, insolvency, and due dates

 

Stay tuned for learning #5 and the final comment of this series…

Co-authored by Christopher Argent, Generation CFO and Per Holmlund, Qvalia, a Stockholm-based fintech company. This month, Qvalia is launching Invoice Shield, their cloudbased A/P automation software and has an integrated feature to easily manage and monitor supplier registries, based on the principles of continuous maintenance and active supplier partnerships.

More big questions here – #BQs

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