Business to business (B2B) transactions are a lot more complex than Business to consumer (B2C) relationships for the simple reason that businesses tend to treat their vendors like part of the family – a family member that has performed a function and demands payment- but family none the less. As businesses depend on the input, product or service of vendors to execute their own client transactions, managing vendor relationships properly are essential to business success. For these reasons, an understanding of how to reply professionally to vendors requesting payment is an essential management skill.
Healthy business to vendor relationships is built on mutual respect and an understanding of each party’s business operations and requirements. Vendors that are unreliable and fail to meet timelines and requirements spell doom for a business, likewise, businesses that fail to pay invoices as and when due adversely affect the cash flow of their vendors.
Tips for Healthy Business-Vendor Relationships
Professional handling of vendor payment requests starts from the initial engagement with the vendor. To ensure a healthy relationship with the vendors that serve your business:
Set Standards for Vendor Payments
Prior to engaging a vendor to provide a product or service, professional best practice is to have a policy about how vendor relations will be handled. Your vendor management policy should address issues such as:
- Point of payment: Will vendors be paid before or after delivering the required service?
- Quality management: If the product or service delivered by the vendor is below par, how will this be handled? Is the vendor mandated to make an exchange? Will full payment be made?
- Payment process: Are vendors required to provide invoices and receipts? How long after an invoice is received will payment be made to the vendor?
Setting these policies out clearly and communicating your policies to vendors prior to engagement ensures that all post-delivery engagements and payment requests can also be professional.
Assign Responsibility for Paying Vendors
The bigger an organization, the more people involved in vendor relationships. The entire vendor process could involve the actual team that needs the product/service, the admin personnel that finds and engages the vendor, the finance department that reviews the invoice and the management personnel that approves the expense.
The actual vendor engagement and expense approval process should be outlined in your company policy. However, be sure to determine where the responsibility for reporting on the quality of the vendor’s delivery and ensuring the vendor receives payment rests. When this responsibility is unclear a vendor’s invoice can be left unhandled for weeks while everyone assumes someone else is handling it.
Communicate Clearly with Vendors
With a vendor management policy in place and clear responsibilities assigned, communicate clearly with vendors for a consistently professional vendor engagement. Vendors, like businesses, must manage their cash flow efficiently to ensure optimal business processes. For this reason, it is important to set and manage vendor expectations by communicating clearly and promptly. Let vendors know when they can expect to receive payment, then be sure to inform them immediately if there is any delay.
How to Reply Professionally to Vendors Requesting Payment
Tap into proper email writing skills and etiquette to manage vendor expectations properly and reply professionally to vendors requesting payment. Here are some tips to help you respond professionally to vendors requesting payment via email:
Communicate based on Payment Policies
A vendor email requesting payment is a business process issue and should be handled with objectivity. Therefore, responding professionally can only be achieved by anchoring all feedback on existing policies. Avoid making promises or statements that may be inaccurate. Instead communicate the policy clearly, stating how the policy affects the vendor.
For instance, if your vendor policy requires a vendor to replace damaged pieces in products they deliver, inform the vendor professionally.
Email Sample: Replying Professionally To Vendors Requesting Payment
Dear Mr Potter,
Further to your email requesting payment for the supply of branded mugs to Miley & Co.
Kindly recall that 5 of the mugs delivered was damaged. Also recall that our vendor policy, which was given to you on engagement, states that delivery must be complete and in good condition for payment to be processed.
In light of these, delivery of the 5 outstanding mugs is required for payment to be processed and released. Once delivery of the mugs is made, payment can be expected with 2 to 3 days.
Please do not hesitate to contact me for any additional information. We look forward to your prompt response and the conclusion of this process.
Miley & Co.
Manage the Vendors Expectation
In the example above, notice how the 3rd paragraph provides next steps and sets an expectation for the vendor. This is essential for communicating to the vendor that they are understood, respected and considered. It shows that you are actively seeking a solution to their issue.
Another practical example for managing expectations is instead of telling the vendor to expect payment by Monday when bank processes may delay the payment let the vendor know that the payment will be processed on Monday and value should be received within 2 to 3 days due to bank processes.
Keep the Tone Professional
In all business communications, not just when dealing with vendors or payment issues, ensure you keep the tone professional. No matter the tone of the vendor's email or actions take responsibility for your own actions by maintaining professionally. Respond to the issues, offer solutions and maintain the business to vendor relationship.
Vendors are important stakeholders in every business and must be managed effectively. Clear vendor management policies, designated vendor management personnel and effective communication are the fundamental building blocks that facilitate the professional handling of vendor payment requests. With these key factors in place replying professionally to vendors requesting payment is a piece of cake.