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Zero Supplier Fees: Help Make it Easy for the Supplier to Participate

The supplier network is a big and critical part of any electronic invoicing solution. Success or failure of any accounts payable (AP) automation initiative dependsCalculator, Pen, and Stock Pages heavily on whether suppliers join the network and start transacting electronically. Then how does it make sense to charge the supplier to send electronic invoices?

Contrary to logic as it seems, the supplier fee model is thriving, with a number of technology providers moving from no fees to supplier fees in recent years. Some providers go the route of drastically reducing the price charged to the buyer with the expectation of recouping their revenues by charging the supplier. Many charge a per transaction fee to the supplier, while some even charge based on the invoice amount, not just the number of invoices a supplier sends. This spend-based pricing model would be tantamount to FedEx saying it would charge consumers based on the value of items shipped, not the distance shipped, size and weight of the package. That seems unimaginable, doesn’t it? What makes providers think that what may be unthinkable in the consumer world is fair within the business world?

So, let’s take a look at some of the reasons why charging suppliers for participating in electronic invoicing may not necessarily be a good idea.

If an organization receives paper invoices, they need resources to scan these invoices and do data entry in their ERP or accounting system, which can be labor intensive and expensive. As it is, electronic invoicing moves the burden of digitizing invoice information from the buyer to the supplier, if suppliers are not using an integrated B2B connection and have to log into a portal to submit invoices. Charging suppliers for submitting electronic invoices is further passing the cost of invoice processing from buyer to supplier.

Supplier fees can have an adverse impact on supplier adoption of electronic invoicing. In some cases, it might be cheaper for suppliers to print and send the invoice via email than pay the fees charged by an eInvoicing provider. Even if cost is not the primary issue, suppliers often have to make significant changes on their end to align themselves with the solution chosen by their customers – dual entry of invoices or integration to their ERP systems. Buying organizations often expect their suppliers to significantly change their processes for them and pay for making the changes, but yet buyers often wonder why adoption of electronic invoicing is so low.

Even if suppliers agree to pay fees to send electronic invoices for a number of reasons – the leverage that the buyer may have over the supplier, for example – there are no guarantees that these suppliers will not pass the cost back to their customers in other forms – such as higher cost of goods for products and services sold or lower discounts and rebates.

Overall, supplier fees — while a prevalent practice — may do nothing to increase supplier participation in electronic invoicing, and in some cases they can actually adversely impact the buyer-supplier relationship.



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