Are you a businessowner looking for a way to increase efficiency, decrease expenses, and save time without compromising quality?
We’re about to give you a step-by-step guide on HOW to implement an optimised supplier management system using Xero’s accounting software.
Before we get our hands dirty, we need to discuss WHY it’s necessary to optimise your supplier pricing and payment system.
Why is seamless supplier management important?
When an apple scans at a different price to the tag on the supermarket shelf, what do you do? You talk to the cashier about the discrepancy and attempt to rectify the situation because you decided to buy the apple based on the agreed upon price on the tag.
Imagine a similar scenario in a restaurant. The restaurant owner orders myriad ingredients every week, all with differing agreed prices from numerous suppliers. The owner doesn’t have time to check if they’re being charged correctly.
As a business owner, it’s important to maintain good relationships with your suppliers while keeping your own best interests in mind. Price adjustments from suppliers are normal, but when you’re managing budgets in tandem with value and quality of the products, you need to be able to anticipate and act upon these changes.
Simplifying & automating supplier management
Storing supplier information on Xero
There are two ways your business can process supplier orders. Either through a purchase order system or an invoicing system. The difference between the two is:
- A purchase order is sent by the buyer to the seller with the intention of tracking and controlling the purchase process.
- An invoice is an official payment request sent by the sellers to the buyers once the order is filled.
Once your business decides on a method, you can implement it by transferring all your supplier information into Xero. The data transfer can be done in bulk through an Excel spreadsheet. Now you’re ready to integrate your supplier files with Dext and ApprovalMax!
Xero integrations for supplier management
Before we start explaining on how to optimise your supplier catalogue, let’s look at the benefits of the apps we’re suggesting.
Dext is one of our go-to platform for document management. It uses OCR (optical character recognition) to scan and extract information from incoming receipts, invoices and other financial documents that your supplier sends directly to Dext.
Dext also syncs with your Xero Chart of Accounts to categorise the incoming supplier data and pushes the extracted information to your Xero file for effortless reconciliation. It does lots of the heavy lifting for you.
ApprovalMax works as the financial control system for accounts payable. Once the bill is analysed and categorised in Dext, the document information is then sent to ApprovalMax where a traffic light system indicates whether the bill information corresponds with the purchase order and the supplier data in Xero.
If the price in the invoice matches the agreed upon prices I the databases, the bill gets the green light (literally). ApprovalMax sends this update to Xero where an alert is sent saying there’s a bill awaiting payment.
How to implement a supplier management system in Xero
Let’s go back to the example of the restaurant owner to put this into perspective. In this case, the restaurant owner has ordered bread through a purchase ordering system.
Step 1: The restaurant owner must import supplier data into Xero and set up their Dext and ApprovalMax accounts to integrate with Xero.
Step 2: Supplier sends invoice through Dext.
Step 3: Dext analyses the invoice, extracts necessary information and categorises it into Xero’s Chart of Accounts. The restaurant owner now has a complete and accurate database of all their suppliers in Xero.
Step 4: The extracted information is transferred to ApprovalMax where the invoice amount is checked against the purchase order.
Step 5: If the information on the invoice matches the information in the purchase order and the data in Xero, the invoice will receive a green light.
If the invoice doesn’t match the purchase order, it will be given a yellow or red light, depending on the level of discrepancy. This could be because the supplier may have changed their prices, charged the wrong price, or delivered an incorrect quantity. If this happens, the restaurant owner gets an alert and contacts the bakery to rectify the situation.
Step 6: Once the green light is achieved, the restaurant owner is alerted via Xero that there’s a bill awaiting payment and an ABA file will be ready for them to download to complete the payment.
Gone are the days of sifting through piles of paper, carefully checking orders line-by-line with highlighter and pen in hand. This six-step process all comes together in one simple, intuitive app – Xero.
Note: If the supplier prices or information changes, it needs to be updated manually in Xero. We recommend human monitoring and management throughout each of these processes to stay in the loop and mitigate any changes.
How do to stay consistent and proactive with business suppliers
Managing your suppliers in a way that benefits the relationship and your business’ bottom line can be a time consuming and taxing process, especially when it’s added to a busy business owner’s forever growing to-do list!
The team at Cole Consulting Group have developed an online course called ‘Be the Hero of your Xero’. The course is designed to help business owners master Xero’s accounting software so they can expertly manage their suppliers as well as run the financial side of their business with ease and confidence.
If you’re already across Xero’s functions and helpful integrations, but still cringe at the thought of bookkeeping at the end of your already busy day, then outsourcing an expert is a sure way to ease the pressure.
We’re all about taking the guess work out of your finances and implementing a strategy that’s consistent and accurate. Get in touch with our experienced team to discuss how we can work together to make your business succeed.