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Save Big with Three Tips for More Efficient Vendor Management

October 19, 2017 | Akshai Rao

Managing vendors and processing payables are significant cost drivers for real estate companies. Processing a vendor invoice manually can take up to 30 days and cost $25 to $35 per invoice. Real estate businesses commonly receive thousands of invoices each month, so efficiency gains in the vendor management and procure to pay workflow can yield substantial cost savings while significantly freeing up staff time.

Understanding the Two Types of Vendors

Yardi Blog Vendors are the lifeblood of the accounts payable process. Making them more efficient is one of the quickest ways to make your accounts payable more efficient. To understand real estate organizations’ vendor bases, we analyzed 25 million invoices processed over the past year. These invoices were submitted by approximately one million vendors to more than 1,000 real estate businesses in multiple countries.

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Through this analysis, we found a consistent segmentation of vendors – those who send up to four invoices per month to a client (low-volume vendors) and those who send five or more invoices per month (high-volume vendors).

Low-volume vendors account for 93% of vendors but only 25% of invoices. Because the volume of invoices and spend is relatively small, these relationships may not have any single owner at your company. Low-volume vendors often repeatedly call about invoice status or send duplicate invoices until they are paid. The resulting calls, duplicate invoices and/or payments and voided checks require time and effort from your accounting department and site staff.

High-volume vendors make up just 7% of vendors but generate 75% of invoices. Your team likely spends substantial time scanning, keying and verifying these large invoice volumes. Large, high-volume vendors typically have a designated relationship owner who manages contracts, pricing and payments. This makes it easier to communicate and adjust initiatives based on their feedback.

Three Ways to Increase Efficiency

  • Take vendor management online. Drastically reduce the time and effort your company spends dealing with duplicate invoices, rejected invoices and voided checks by giving low-volume vendors an online portal. Through an online vendor portal, they should be able to update their profile, check the status of invoices themselves and send electronic invoices as needed.
  • Automate the invoice process. Moving high-volume vendors to electronic invoicing saves your staff hours of time and shortens the invoice-to-payment cycle. Electronic Data Interchange (EDI) is the most efficient option if a vendor can support it. But many vendors have not invested in this technology. In that case, sign them up to start submitting invoices electronically through the vendor portal.
  • Outsource manual invoice processing. If electronic invoicing is not a viable option for you or your vendors, outsourcing invoice scanning and data entry frees your staff from these labor-intensive tasks. This lets your employees focus on managing contracts, pricing, aging and maintaining positive vendor relationships.

Significant Savings

Yardi Blog Tremendous value can be unlocked by effectively managing vendors. Leveraging electronic invoicing or outsourcing the scanning and keying of invoices has the potential of reducing your cost per invoice from $25 to under $5. And increasing transparency into invoice status will decrease the number of duplicate invoices you receive, which in turn reduces resulting reversed payables and voided checks to under 2%.

Conclusion

Many real estate organizations today contend with lengthy, costly and highly error-prone procure to pay processes. Taking steps to automate the way you receive, process and pay invoices can shorten your invoice cycle, prevent errors, eliminate overpayments and improve your relationships with low-volume and high-volume vendors. By giving your vendors tools to work more efficiently, you can streamline the entire procure to pay process.

About the Author

Akshai Rao joined Yardi in 2013 and is the Vice President of Yardi’s Procure to Pay business unit. Akshai is responsible for the implementation and support of Yardi’s Procure to Pay client base, which spans 1,500+ clients across all real estate verticals and several countries. Learn more at Yardi.com/ProduceToPay or reach out to Akshai at akshai.rao@yardi.com.

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