**London**: A new report by Taulia and Mastercard highlights that 92% of organisations face significant risks when engaging non-approved suppliers. The study calls for a reassessment of supplier relationship strategies and emphasizes the need for reliable payment solutions to improve cash flow for these suppliers.
A recent study conducted by Taulia, in partnership with Mastercard, reveals that 92 per cent of organisations are exposed to significant risks such as non-payment, legal disputes, and potential reputational damage while undertaking billable work as non-approved suppliers. This alarming statistic highlights a prevalent issue as many businesses lack the necessary financial protection and legal recourse typically afforded to approved suppliers. The findings suggest a pressing need for companies to re-evaluate their supplier relationship management (SRM) strategies.
The research indicates that 20 per cent of businesses reported they ‘always’ engage in billable work without obtaining the assurance of being an approved supplier, while another 29 per cent stated they ‘usually’ operate under similar circumstances. The absence of clear terms can create a precarious situation for firms, underscoring the importance of robust supplier relationships as a means of resilience and competitive advantage.
When exploring the challenges encountered during the initial stages of establishing a business relationship, registering on a new supplier portal emerged as the foremost obstacle, cited by 50 per cent of respondents. This concern was articulated twice as often as issues surrounding due diligence, mentioned by 24 per cent. Compounding these difficulties, factors such as data-sharing challenges, system complexities, and the labourious integration process with existing Enterprise Resource Planning (ERP) systems often lead to delays in payments for new suppliers.
Streamlining these processes is crucial for new suppliers, as it can significantly impact their ability to manage cash flow effectively. Payment solutions that facilitate seamless ERP integration, such as Taulia’s Virtual Cards, are poised to play a pivotal role in ensuring quick and frictionless transactions. However, the research indicates that only a minority of supplier payments are conducted via virtual cards, with wire transfers still dominating the landscape.
Danielle Weinblatt, chief product officer at Taulia, stated: “Our report has highlighted that suppliers are looking for payment methods that are reliable and offer near-instantaneous payments to their accounts. It’s also become increasingly clear that payment innovations should not just focus solely on the buyers, but also must incorporate the needs of the suppliers.”
The findings reflect a significant gap in the services offered to suppliers, emphasising the necessity for payment systems to adapt in order to meet their requirements. Rebecca Meeker, senior vice president for B2B partnerships at Mastercard, elaborated on this, saying: “Suppliers want visibility and transparency as to how they are getting paid. They also want the option to be able to accelerate payment, which the virtual card provides.”
Meeker also remarked that suppliers require clear visibility into approvals and direct deposits to effectively manage their cash flow. She highlighted the drawbacks of traditional paper checks, which complicate reconciliation processes. “By optimising for suppliers,” she explained, “the payments industry can provide clear tracking of receivables and empower suppliers to make informed decisions.”
The research points towards an underutilised opportunity within the domain of supplier payments. With a small percentage of transactions conducted via virtual cards, Meeker indicated that suppliers could harness faster processing times, enhanced spending control, and improved security through the adoption of innovative payment solutions. Moreover, the ability to forecast based on historical payment patterns can empower suppliers, equipping them with actionable insights that enhance their decision-making processes for pre-contract work.
As organisations navigate the evolving landscape of procurement, there is a clear trend emerging that underscores the importance of fostering stronger supplier relationships. This shift from a cost management focus to value creation positions firms to build greater resilience against operational risks while securing a competitive advantage in their respective markets.
Source: Noah Wire Services
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