Is The Increasing Move To E-invoicing A Reason For The Recent Improved Payment Performance In The Uk

By Author: Donald Nason
Total Articles: 48
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In a recent report on European payment trends, the business information provider Dun and Bradstreet reveals that payment performance in the UK has improved over the past year – and identifies the increasing move to e-invoicing as a possible factor behind this change.

This news comes as a welcome reversal of the trend that has been dogging British business for the past decade with an average late-payment peak of 17 days in 2011. The average as explained by Dun and Bradstreet in this latest report stands currently at 15 days late against payment terms.

Late payments are a huge problem for business – cash-flow issues can see companies having to cut back on trading, reduce staffing levels and at times lose their business altogether – and which can lead to a devastating knock-on effect in the local community, in the more widespread commercial area, and for the British economy in general.

The government is so concerned about the potential damage the late payment effect can cause to individual businesses and on a wider scale nationally, that the Department of Business and Innovation Skills has set up the ...
... Prompt Payment Code, administered by the Institute of Credit Management.

With its strap-line driving a change in payment culture, the code urges organisations to pay suppliers on time, to ensure they have a reliable system for dealing with disputes accurately and swiftly, and to encourage good practice through asking lead suppliers to adopt the Prompt Payment Code throughout their own supply chains.

For the customer, eliminating late payments has the additional benefits of:

• enhancing the customer-supplier relationship and the reputation of the business
• improving the business’s financial position through doing away with the need for making late payment interest and penalty payments
• optimising the take-up of early settlement supplier discounts opportunities, and may help in the negotiation of better deals
• ensuring supplies aren’t stopped.

And it’s long been recognised that late payments are certainly not necessarily ‘tactical’ or even the result of customer cash-flow issues, but in most cases caused by poor practice and inefficient and slow processing procedures prone to error.

So it would be hard to see why automating accounts payable (AP) processing and implementing a streamlined and efficient solution would not have a major effect on improving payment performance.

With an invoice management solution’s automatic document and data capture, invoice processing gets off to the fastest possible start – and means data entry costs are significantly reduced as well.

Automated invoice management enables companies to capture e-invoices automatically (typically delivered via email), collect their data and post them straight on to the finance system once they’re ready to be paid – many companies receiving e-invoices are still merely printing them to paper and therefore losing all the advantages e-invoice processing brings.

High performance invoice matching and online coding and authorisation streamlines the processing, and instant document retrieval means that any disputes can be quickly resolved. With alerts to flag approaching deadlines, IMS also includes powerful reporting tools to monitor performance.

So invoices no longer get lost between department, or sink to the bottom of an in-tray, but are ready flagged for prompt payment – and following the recent updated EU Payments Directive which came into force March 2013 prompt payment is going to become even more important for the customer.

This amended legislation (European Directive 2011/7/EU on Combating Late Payment in Commercial Transactions) has been devised to make pursuing payment within the European Union simpler – according to the UK government, “reducing the culture of paying late and making paying on time the norm”.

These new rules will mean organisations having to pay interest and reimburse reasonable recovery costs if they do not pay for goods and services on time, within 60 days for business and 30 days for public authorities.

Dun and Bradstreet’s report looked at payment data for nine EU countries. The UK’s 15-day average is slightly above the average across the nine countries – and behind Germany (the ‘best’ payer at only six days beyond payment terms), Netherlands, Belgium and France, but in front of Spain, Ireland, Italy, and Portugal at the other end of the scale with an average of 22 days late.