I thought it might be interesting to give you insight to the types of contractual agreements that work well for AP Automation. As I have written many times, one of the down sides to AP Automation is the fact that people generally don’t have experience with it. (And) Other experiences tend to get in the way of automation.
Well, what I mean by other experiences is; I am sure that each person reading this article has done some sort of contract negotiation. Whether that’s buying a car (personally) or being the lead on a piece of software like an accounting system. That is the type of experience that can get you in trouble with AP Automation, especially the accounting system. If you have worked on an accounting system contract there are a few things you need to ask as well as making sure your terms and obligations of the agreement are correct. That’s the same thing with AP Automation, but above and beyond basic terms there are three additional things you should negotiate that are big helps
Thing 1 – Guarantees
Because most Accounts Payable Automation solutions are third-party and detached from the accounting system, which by the way is a great thing, integrating with all of the systems that need to be communicated with is critical. Where this can help you in an negotiations is to create guarantees. Asking for a guarantee, like money back if you aren’t able to integrate, or money back if a certain time frame is not kept. The more powerful the guarantee, and the more willing the service provider is to do the guarantee the more comfortable you should be with that service provider. The opposite is true also. If the service provider is reluctant to give guarantees… buyer beware.
Thing 2 – Transactions
Another things that is uniquely AP Automation are transaction based agreements. For automation it is very simple to put a price on each invoice or each payment to establish a cost. To negotiate a contract, make sure that you have as many expenses tied to that cost as possible. Things like, license, storage and support fees are examples of fees you can include in your transaction cost. Also be very aware that the number of transactions your accounting system says you process, if you get the information from a report, will be more than you actually process, so it is important that when the transaction fees are calculated that they are based on actual numbers and not based on a pre-established number.
Thing 3 – Terms
One of the big things that an agreement typically gets negotiated on is the length of the agreement. With AP Automation most people initially think the terms are important, but they aren’t as important as you might think. Once you have committed to going paperless in AP it is very difficult to switch to another service provider and it’s even more difficult to (I should write – impossible) to go back to paper. That’s why the length of the agreement is somewhat irrelevant. It is important to lock in rates and agree if the rates go up what the additional percentage will be, but as far as time is considered don’t worry too much about a long-term agreement.
I love negotiation. It’s my favorite thing in life. My wife says I buy a new car too often because of negotiating, but a little strategy can go a long way.
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Categories: Accounts Payable Automation