Automation to Manage Complexity: The Key to Vendor Program Success

By Q2

12 Aug, 2020

By Jim Donatell, Sr. Director, Strategic Accounts, Q2

Perhaps more than any event before, the global COVID-19 pandemic has caused equipment finance companies to seek automation solutions as a way to simplify vendor leasing programs. Given new constraints on financial transactions, enlisting cloud-based technology is more important than ever before. To streamline vendor leasing programs, executives are looking to their finance company to help navigate coronavirus disruptions and mitigate risk.

Long before the pandemic—spanning at least 25 years—vendor programs were key drivers of top-line-revenue growth for successful equipment finance companies. In recent years, new lease originations in the U.S. total more than $900 billion, with the majority being sourced through vendor channels.¹

With this productivity of vendor finance comes a significant challenge: complexity.

Keeping all moving parts moving

The simple truth is vendor programs are complex and, therefore, labor-intensive to initiate, maintain, and scale. The typical vendor program has nine critical components, with over 100 variables. This complexity means a program often contains thousands of variations, each of which must be established, maintained, updated, and monitored for compliance and performance reporting—all in a dynamic and competitive marketplace.

For all the variations of each of the components mentioned, personnel is needed at each stage, from initiation through maintenance and reporting, to ensure a successful vendor program performs optimally. A successful program can require up to 12 people using up to nine different spreadsheets and software applications to support the program. Steering a ship this big can be an unwieldy and time-consuming process; making wholesale modifications and updating the programs can take up to two months.

This lack of agility results in unwanted but necessary staffing increases to manually support the program, as well as losses resulting from non-compliance of programs that have fallen out of date. Let’s not forget the missed revenue opportunities due to outdated pricing and point terms and the limited ability to add new programs quickly. There are very few easy options for making vendor programs work without having the personnel necessary to ensure their complexity is managed at each stage of their existence.

Automation for efficiency

There’s no magic-bullet solution, but automation can help reduce the headcount that adds so much expense, bulk and time to vendor programs.

In Q2’s experience, a lack of program automation is the single biggest factor contributing to inadequate margins from vendor programs. This isn’t surprising because a typical lessor that utilizes programs has between 600 and 3,000 vendors. Each is added to and maintained by the appropriate programs manually, and updates take months to complete. What’s more, operational inefficiencies and business risks can result from the necessary manual updating and use of homegrown siloed systems and workarounds.

Look to the cloud

Given these challenges, automation can significantly help a vendor finance program succeed. And a cloud-based solution is ideal for gaining the light footprint, flexibility and speed that are critical to a vendor program’s success. A cloud-based solution that is highly configurable—enabling automation across all vendor programs, components, contractual terms, and financials—is the key for ensuring accuracy, completeness, and effective communication across the value chain. And a system that fits into the Salesforce ecosystem you already know makes the integration easy for everyone involved in the equipment leasing and finance lifecycle.

How Q2 solutions help

Q2 meets the complexities of vendor programs with a simplifying solution. One that digitizes and automates the four major phases of any program:

Vendor program management
Origination and underwriting
Contract servicing
Collections

Because Q2’s vendor program solutions are built natively on Salesforce, they give lessors the ability to:

Extend their Salesforce ecosystem to automate the back office
Support multiple types of vendor agreements and programs
Apply, maintain and update terms and conditions automatically at a program level
Track exceptions to agreed terms and conditions
Create, modify and automate the selection of documents by program
Track residual value, guarantees, and exposure at both the equipment and contract level
Accurately compute points payable to dealer
Calculate volume and performance by program, dealer or manufacturer
Offer a high degree of transparency to vendors
Provide automation of vendor onboarding, both full and partial

More than ever before, Q2 is working nimbly and efficiently to anticipate the needs of FIs’ vendor programs—and ultimately ensure their success by doing so with minimal personnel, effort, and time. The difference in Q2’s solution is what it doesn’t contain: bloated staffing, disconnected data, and lengthy maintenance and updating demands. Those are advantages that will always yield results at every stage of a successful vendor program.