Late Payer? What’s Your Excuse?

We are pleased to welcome this guest post from Daniel Ball, director at Wax Digital.

According to BACS, in spite of the fact that there’s been a significant drop in the overall late payment debt currently owed to the UK’s SMEs, they still face a total bill of £2.16 billion for chasing overdue payments.

Late payment is a chronic issue for businesses of various sizes and across multiple sectors, and while many businesses go to great lengths to ensure they receive timely payments from customers, many admit that they don’t apply the same principle to their own suppliers.

Our own research shows that a significant number of senior finance managers sack customers for consistent late payment, and only less than a third always pay their own suppliers on time, with many admitting to being frequent late payers.

Poor invoicing processes don’t just mean delays with money changing hands, it can also mean an end to carefully sourced supplier relationships, and reputation, costing the business much more in many different ways. Ultimately, poor payments could see suppliers in financial crisis themselves, and potentially put out of business. Is it worth putting the business in jeopardy and putting yourself at risk from losing a trusted and valued supplier?

While most businesses admit that late payments should be avoided if possible, some believe it to be ‘the norm,’ while others state that it’s out of their control. While in some cases late payments are a result of the business choosing to pay late due to their own cash flow issues, there are many times when it is simply the result of inefficiency.

Stamping out inefficiencies

Much of the evidence we have seen as an eProcurement software provider points to the fact that many late payment issues are accidental and avoidable, and are often caused by ineffective, manual and inaccurate invoicing and payment processes that could be improved.

Our research showed that invoice processing timescales, internal manual processing errors and delays in approvals from finance are all often blamed for late payments. However, suppliers too, can delay the payment process as businesses wait for delivery of their invoice via either hand, fax, post or as an email attachment. And they are of course prone to making errors too with inaccurate wording, missing POs and incorrect values on invoices all slowing down the payment process.

The truth of the matter is that most finance teams are today facing an evolving invoice management challenge. In the midst of a technology-enabled world with digital transformation happening at speed across most organisations, everyone’s processes differ in the way they issue, process and pay invoices. This leads to huge and increasing complexities in the types of invoices organisations need to accept and deal with, putting greater strain on their ability to pay them on time and in a process-efficient manner.

If organisations want to maintain a healthy supply base, consistent invoice processing is essential, and the good news is that the challenge is easily solved. Firstly, organisations need to find a way to uniformly and speedily manage the vast number of supplier invoices in different formats it receives so that it can digitise the data from these sources efficiently. Next step is to try and convert as many suppliers to digital invoices as possible in order to try and save time and costs on both sides.

Improving internal efficiencies by automating payment processes can help suppliers get paid on time and ensure that a long lasting, healthy relationship continues for both sides of the relationship.

Wax Digital has produced a research report to help finance teams overcome their invoice management problems.  The Trouble With Invoices can be downloaded for free.

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