In Part 1 of our blog, we looked at the Prompt Payment Code and discussed what it could mean for your organisation. In this part, we tackle the challenges you might face and how you can solve these to take on the Prompt Payment Code Challenge.
We have identified the following key challenges which organisations could face in meeting the Prompt Payment Code:
- Technology Adoption
- Data Quality of Purchase Orders Upstream
- Reporting and Analysis
We look at these in more detail below.
Without the right technology in place, to help you manage the invoice process, then there may be a number of manual processes which create more time and effort for your teams which in turn can have a knock on effect in meeting the Prompt Payment Code.
If we take the following example which might be a reality for some organisations:
Suppliers send in paper invoices, finance teams are manually keying in each line of data to their systems and then re-keying, which is where mistakes can occur. (According to the Accounts Payable Association in a survey of over 500 finance UK professionals, 57% of all invoices were received as paper invoices.) Then the paper invoice gets copied a few times and sent to various people in the organisation for the different stages of approval. When all necessary approvals have been made, the finance team then needs to process the invoice for payment. This process can take some time: people may be out on the road, working remotely, managing with their own day-to-day tasks and they may not prioritise the approval of the invoice. Add to this the fact that the paper copy can get lost and finance will need to re-copy and send this out again, assuming they haven’t lost the original and need to go back to the Supplier.
This is obviously a worst case scenario but may be one which many of us are familiar with in our professional life…unless you have already implemented a solution which helps to streamline the process, with technology at the heart.
Implementing an eInvoicing solution for your organisation, can help you to speed up the entire process as well as minimising errors. Through an electronic solution, the Supplier creates their invoice in XML or converts it to a PDF (which their finance package is likely to be able to do) and then emails it over to the Buyer. At Science Warehouse, we act as a transaction network between Buyers and Suppliers, so we can take care of the connection so you don’t need to.
Data Quality of Purchase Orders Upstream
All this works well in principle, but how do you ensure that the eInvoice that is sent by the Supplier matches a purchase order which has been raised previously? Again, if this has to be a manual process due to restrictions in technology, then this will be time consuming and will add on additional time for approvals, hampering your efforts in meeting the Prompt Payment Code.
With an eMarketplace solution, once a commitment is made to buy a product or service, an electronic purchase order is created and this is then sent across to the Supplier so any invoice they create, can be tracked to that exact purchase order. This reduces any mis-matching that can occur between invoices and purchase orders so you can be confident that you are able to track any invoices back to spend. If you start with bad data being created in your system, then it will make the matching process near impossible, so accuracy is key.
This is very much a two-way process and needs to be controlled not only from the Supplier’s side but also from the Buyer’s. By providing a solution which automates the approval process on the Buyer’s side – by matching invoices to purchase orders – this further streamlines the process, saving time and money.
Reporting and Analysis
Having all this spend information going through your system, is all well and good, but if you are not able to extract and analyse it to gain a real understanding as to where continuous improvements could be made, then you could be missing out on the bigger picture and significant benefits that your procurement team can bring to the organisation.
Having a spend analytics solution, which allows you to extract information from multiple systems and analyse this to line level, gives the real insight you need and therefore make decisions based on all your information, rather than dealing with disparate data sets.
The Public Contracts Regulations 2015 also state that public organisation now need to provide visibility on payment terms – they must now report annually on the percentage of invoices paid within 30 days and any interest that is liable on outstanding invoices. Implementing a spend analytics solution which can help you extract this data is surely an added benefit and saves you time which would otherwise be spent trying to manually extract the information you need to report.
Prompt Payment Code – Do you Feel Prepared to Take on the Challenge?
It isn’t all about saving you time and money, but it is ensuring you have the right process in place for your organisation and we realise this at Science Warehouse, that every organisation is different. This is why we take the time to really understand your challenges, as well as sharing our experience, so you have the best spend management solution in place to continue to drive you organisation forward.
Culture change is one thing but why wait when readily available technology can accelerate transformation and take the Prompt Payment Code to a new level of widespread acceptance?