Having cash on hand is a means of survival. That’s why many businesses choose to stretch the time between services rendered and payment to their suppliers. It’s the way it’s always been done, of course, so lagging payments are naturally accepted by most B2B vendors. But if cash on hand is a means of survival for businesses, it’s also certainly a means of survival for the person providing the service.
Rather than “hating the game, not the player,” we decided it was time for a new game.
Our mission here at CQ fluency is to improve lives. This includes the lives of our vendors who depend on us for their revenue, especially since many of our vendors are women and minorities who have historically had issues obtaining working capital to grow their businesses. To truly live out our core values, we felt it was key that we pay our suppliers, vendors, and partners as soon as possible after receiving their invoices.
So we changed the rules. Here’s what happened:
making a business case for faster vendor payments
The pandemic may be “over,” but its effects have been long-lasting. We see evidence of its devastation in many ways, including a longer period between vendor payments and services rendered. The Wall Street Journal notes that large U.S. companies on average took 58 days to pay suppliers in the first quarter of 2021 – a 5.5% increase from 55 days compared to 2020.
Paying your vendors as quickly as possible makes sense from a business standpoint. We have an immense network of diverse suppliers and vendors, many of which are minorities. An estimated 10,000 certified businesses owned by minorities – including women, people of color, LGBTQ+, veterans, and the disabled – earn $10 million a year or more in revenue and are ready to compete for business. Naturally, we aim to impress them, especially given the value that we can offer each other when we prioritize our relationships.
The current vendor financial system has systemic biases. Studies show that minority-owned firms – particularly black-owned businesses – experience bigger barriers in obtaining financing. They possibly have larger, unmet financing needs. We discovered that such a small gesture of paying them in a more timely manner could have a big impact on closing that gap for them.
Also, late supplier payments continue to plague the supply chain, especially for small businesses. Every day that passes without payment could delay a business from procuring supplies, paying their own employees, handling bills, or any number of things that affect the business’s health.
the short story: our vendors love it
After implementing a faster turnaround for vendor payments, we noticed a few key benefits right away:
faster payments help with customer recruitment
Our vendors have become a pseudo-recruiting channel. They are happy to refer us to their colleagues in the industry. When vendors research CQ fluency, they find good feedback in the community and are more likely to reach out to us or respond to us when we reach out to them.
it reduces admin time for vendors and internal teams
Vendors do not need to spend time chasing their payments and can dedicate their time to what they do best. In turn, we can do the same. Vendor Management and Finance teams are not wasting time fielding payment queries and can keep moving forward.
it helps CQ fluency build great relationships with our suppliers
Vendors find it easy to do business with us. They can rely on a predictable payment schedule and may choose to take on work from us rather than a competitor.
the longer version: quality, respect, and cash flow flourished
Respect for our vendor community is what makes the best linguists work for CQ fluency. How we conduct our finances helps us build trust and enhances our relationships over time. Even when we haven’t been paid by our clients yet, we make sure to quickly pay our linguist freelancers and vendors who depend on income from us for their day-to-day lives. This results in quality work, repeat business, and strong revenue growth.
Paying on time avoids employee burnout and scrambling. Dreaded emails or phone calls asking for a late payment can cause employees to interrupt their workflow to address these urgencies. It can also lead to feelings of mistrust and resentment, neither of which help to build long-lasting business relationships.
Building an honest relationship via early or on-time payments can also create opportunities for procurement departments to negotiate better deals than the ones previously had. This reduces the lift on the vendor’s side, which may incentivize more favorable pricing.
In short, reciprocation goes a long way. By prioritizing our vendors’ cash flow, we’re able to improve our own by remaining competitive, earning business referrals, and maintaining good vendor relationships (which reduces our operating costs).
To make things even easier and more appealing to our vendors, CQ fluency’s platform allows vendors to invoice at the click of a button. It tracks all of their purchase orders and invoices in one place so they can check the status of their invoices at their convenience.
These are the same tools and processes that we like to see from the companies we do business with. Being on the “other side” of the payment process makes it easier to see where we can make valuable improvements to our own approach.
how we’re creating a new standard in vendor relationships
So what’s our secret sauce in developing a faster payment timeline? In all honesty, it wasn’t a drastic shift. The payment needs to be made, whether it’s the same day, next day, or 60 days from receipt. Why not go ahead and mark it off our must-do list?
We started developing our payment process by first looking for actions that cause late payments in the first place. One glaring reason for this is inefficient internal processes, such as missed or forgotten invoice dates. Juggling paper documents and manual processes shows to be a cause behind these delays. Data shows that the two most common issues faced by AP teams is the handling of paper invoices (38%) and manually processing the information (28%). What’s more, 34% of respondents said the inefficiency caused stress and nearly a quarter said it was detrimental to supplier relations.
Once we made the decision to improve payment timelines, we’ve worked continually to optimize our process to alleviate the aforementioned burdens. This includes:
- Standardizing the payment process with automation to improve efficiency and efficacy (fun fact: only 5% of businesses are using a fully automated accounts payable approach, while 19% of businesses have no automation at all)
- Leveraging purpose-built technologies—including cognitive and machine learning capabilities—that free up human time to do more value- added work
- Implementing self-corrective tasks—utilizing tools and advanced AI capabilities—that improve accuracy in complex transactional environments
- Using Financial Management ERP & API connecters through a single platform, along with BI tools that reduce technology redundancy and can shorten close cycles
With automated and purpose-built technologies already widely available, it naturally became easier to implement solutions and pay suppliers on time. We can’t change the payment process for every business, of course. But by implementing changes within our own organization, we’re hoping to show vendors and companies there’s a better way – one that has value, meaning, and simplicity built in.