PROACTIS Blog

Is Your Supplier Eco-System Being Hit by a Hidden Tax?

Charlotte Sutton
Charlotte Sutton,
PROACTIS
Add the word 'tax' to another word and it becomes toxic, think 'graduate tax', 'bedroom tax' and even 'pasty tax'. But is your organisation and those it buys from suffering from an invisible 'supplier tax' that is sapping the life out of your business relationships?
Just to be clear, we're not talking about a new levy issued by HMRC. The 'tax' in question is more of a resource-devouring phenomenon that can pervade every corner of your supplier eco-system.

Are you being impacted?
If you run a small coffee bar, you'll probably deal with a dozen or so suppliers, from the bean wholesalers to the people who provide the free WiFi you offer your customers. Life is relatively simple and there's time to develop and maintain good relationships with everyone, as well as keeping their contact details up to date and sorting invoices and payments easily.  

But deal with hundreds or thousands of suppliers and there's a tipping point where the administrative burden can become overwhelming. It impacts Procurement teams as well as their colleagues in Finance. Even completing the simplest tasks can drain your resources and your suppliers may feel the same way every time they have to deal with you.

So, what's causing this 'supplier tax' on everyone's time, talents and money? 

Here are six reasons why it's occurring:

Reason #1: On-boarding blues 
New business relationships can get off to a bad start if the on-boarding process for the new supplier is anything less than quick and intuitive. Lengthy paper forms will be completed grudgingly by suppliers and keyed into the system laboriously by your staff, with the potential for mistakes. And if crucial questions are missed off, then you might also fail to identify potential risks to your business later on. 

Reason #2: Catalogue hassles
Keeping supplier profiles and catalogues up to date can be an enormous task. But failing to do so will impact your buyers, lead to ordering errors, delays and confusion all around. Getting suppliers to refresh details themselves would be ideal. But giving them access to your systems can sometimes present security problems.

Reason #3: Poor communications 
How easily do you interact with hundreds or thousands of suppliers? Bizarrely, despite today's advanced technology, most buyer-supplier interaction is based largely on post, email, fax and phone calls. Often, there's no single interface where two-way communications with each supplier can be handled with ease. Instead, hard-pressed staff often answer the same kinds of questions, again and again, in a time-intensive way. It's not long before morale takes a nose dive.

Reason #4: Lack of transparency 
Accounts Payable teams spend too much time answering supplier questions about invoices and payments and then chase down details with emails and phone calls across the business. Wouldn't it be easier if suppliers could simply look online and check the status of every invoice in seconds?  It's possible, but it rarely happens. 

Reason #5: Zero evaluation
Reviews are the lifeblood of businesses like Amazon, eBay and TripAdvisor, but can you identify your best suppliers? Consistent evaluation of supplier performance within your business is important for quality control, contract renewals and who's been invited to compete for new orders. Too often this relies on complete guesswork. 

How much 'supplier tax' are you paying today?
Do reasons one to five sound familiar? If so, then the true cost of any items you purchase is likely to be significantly more than the checkout price.  

It's only when your supplier eco-system becomes frictionless that mutually-beneficial business relationships can really thrive and avoid 'supplier tax'. But how can that happen? 

Find out by reading our next blog, 'How can my supplier relationships become friction-free?'

Alternatively, see how to gain full control of the supplier lifecycle and enrich procurement