Keep Supply Chains Flowing with Streamlined Healthcare Vendor Payments


The COVID-19 pandemic demonstrated just how valuable vendors are for the healthcare industry—providing and distributing N-95 masks, ventilators, and other medical equipment faster than ever before. However, the pandemic also highlighted the importance of strong relationships with these suppliers. While many factors contribute to maintaining and improving vendor relationships, the payment process is an area that is often overlooked. The healthcare industry can improve supply chain issues and their relationships with vendors by adopting best practices related to their accounts payable (AP) process.

The importance of vendor relationships in healthcare

Elle Kowal

Elle Kowal

Vendors are vital to many industries, but when it comes to healthcare, lives may be on the line. Medical facilities that lack critical supplies are unable to provide optimal care. Of course, many factors affect supply besides the relationship with the supplier such as demand, and availability of materials. But a good vendor relationship can expedite shipments and improve your working relationship.

Challenges with maintaining vendor relationships

Maintaining supplier relationships requires a number of steps including good communication and timely payments. Some of the biggest challenges many healthcare providers face come from handling these AP tasks manually. In fact, according to MineralTree's forthcoming 2022 State of AP Report, 26% of healthcare AP teams are spending between 6-10 hours a week just answering vendors’ questions.

Invoice processing challenges and delays are the top obstacle for AP departments, stemming from supply chain disruptions. From that same report, 53.2% of healthcare industry respondents indicated they experienced challenges and delays associated with invoice processing, as compared to 43% of non-healthcare organizations. Delays in invoice payment processing strain vendor relationships for obvious reasons–companies like to get paid in a timely manner. But it also causes some less obvious relationship strains.

For example, these delays can leave vendors with questions about where an invoice is in its processing. Delays not only impact your AP team, but your supplier’s AR team, as they try to navigate where payment is, leaving vendors frustrated. These delays also affect your internal team’s time, as the number of inquiries increase. The result is a higher workload, which can lead to even more setbacks in a sort of feedback loop of inefficiency. Delays often increase the odds of errors and paperwork confusion as items may get overlooked if too much time passes, or invoices may get re-sent and entered twice.

Best practices for improving vendor relationships

Supplier relationships are best supported by practices that emphasize efficiency, visibility, and the streamline of the invoice-to-pay process. Consider applying the following best practices:

Streamline processes with automation

Over half of healthcare companies (56.4%) agree that there will be challenges in hiring quality AP professionals in 2022. A staffing shortage certainly doesn’t help matters when it comes to improving efficiency, speeding up payments, and keeping vendors happy. In fact, the problem only compounds for organizations facing increasing or fluctuating invoice volumes.

Healthcare companies can overcome this difficulty, however, by adopting an AP automation solution. Automating the end-to-end AP process reduces errors, speeds up processing and payment times, and makes it much easier to adapt to changes in invoice volume. For healthcare companies that haveautomated their AP process, 65.2% are automating more invoices with the same size team. And yet, there remains ample growth opportunity for AP automation within healthcare as only 18.4% of healthcare companies have fully automated their AP process. Although the majority of healthcare companies have yet to fully automate their AP, the results of early adopters have been convincing enough that now 42.2% of healthcare companies report plans to further automate their AP process.

One example highlighting the power of AP automation within healthcare is BrightView Health, an outpatient medication-assisted treatment in Ohio and Kentucky, which expanded from four treatment centers to 30 over the course of two years. In this time, they went from processing 3,000 to 10,000 invoices. 3,000 to 10,000. The majority of these were still processed via mail. Previously it took their AP team five to seven minutes to process an invoice. By implementing an AP automation solution, the entire process now takes mere minutes.

Accelerate payment by providing electronic payment options

Reliance on paper check payments is less than ideal for multiple reasons. Paper checks must be physically printed, handled, mailed, and then deposited before payment is received. This takes time and the manual nature of each step leaves even more room for delays. When compared to other industries, healthcare companies are often lagging behind in terms of electronic payments. 47.1% of healthcare companies noted decreasing their use of checks for payment. In contrast, 57.2% of non-healthcare companies are decreasing their check usage. Additionally, 42.4% of healthcare companies are using checks for more than half of all payments, compared to 31% of non-healthcare companies.

Checks also aren’t as conducive to the modern hybrid and remote work landscape, since people and physical paper objects are often not in the same location at the same time. According to the report, 64% of healthcare AP teams are remote at least part of the time (45.6% are hybrid while 18.4% are fully remote).Instead, by offering electronic options, you can process payments more efficiently and ensure they are received in a timely manner.

Virtual cards are considered one of the best options by many, since they offer greater speed and security. These non-physical cards are single-use 16-digit numbers authorized for a specific payment amount. They are fast, secure, and frequently come with rebates that can contribute to your organization’s cash flow. But because each vendor will have different preferences, it’s best to make multiple payment choices available. Ideally, you should choose an AP platform that integrates all payment options and enables easy processing for all transaction types. Additionally, specific AP automation platforms can help track which vendors accept virtual cards and help you enroll suppliers in this payment type, freeing up your team’s time in the process.

Improve visibility and control with a vendor portal

Adopting an AP platform with a vendor portal component can go a long way in both keeping vendors happier and making your AP department’s job easier. With a vendor portal, your suppliers can log in and view where every invoice is in the process to easily get their questions answered. This also means your AP department isn’t losing time each week answering the phones and tracking down information.

These portals also often give suppliers the ability to easily update their information, which prevents payment delays and errors when addresses or payment preferences change. Additionally, since suppliers can update their banking information directly into a secure application, your AP team won’t need to manage this sensitive information, adding an extra layer of security to your AP process. Vendors may even have the option of directly submitting invoices through such a platform for additional convenience both on their side and yours.

Final thoughts

Adopting an AP platform that enables end-to-end automation means invoices are captured quickly and easily, routed to the correct people for approvals, which allows for a faster payment process. Bottlenecks or delays caused by remote working or papers getting lost can become a thing of the past, as your AP team also spends less time answering vendor questions and performing manual tasks. By mitigating delays in the payment process, your team can ensure that vendors are paid in a timely manner, resulting in strong relationships with these suppliers.

Not only does automation lead to better vendor relationships and improved supply chain flow, but it helps your organization take on external challenges while scaling and growing your business.

Elle Kowal is Chief Operating Officer, MineralTree

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