Late payments are becoming a huge problem for many UK businesses, with some being put out of business because of it. In a recent survey conducted by Graydon and the Forum of Private Businesses, called Research on Payment Culture, they found that more than half of the respondents who own small businesses find the late payment of trade invoices to be a problem. Nearly 124,100 businesses were almost put out of business last year due to late payments, which is a staggering number.
So what are some of the major contributors for companies paying late? According to the British Chamber of Commerce latest report, The Prompt Payment Report, there are several reasons which could contribute to late payments; which include:
- Suppliers not being able to pay on time due to not being paid by their own customers.
- The current economic climate is having an effect on payment, as ‘most customers are paying late, regardless of their business size. ’
- Larger businesses are seen as more likely to pay late than smaller businesses according to 34% of the survey respondents.
At the moment businesses are able to sign and be protected from late payments by the Prompt Payment Code, which is about encouraging and prompting best practices between businesses and their suppliers. But what if you are doing business with someone who hasn’t signed up to the Prompt Payment Code? According to Graydon, the most effective way to deal with late payments is to make sure you promptly invoice or call the businesses after the work has been completed.
Another way to combat late payments is to introduce a complete purchase-to-pay (P2P) invoicing system into your finance department. These solutions encompass e-invoicing and supplier invoice automation to efficiently process outgoing and incoming invoices. An Accounts Receivable solution and Invoice Management Solution (IMS) can be used together to create a seamless P2P system. Through a combined solution like this, businesses would be able to maximise cost and efficiency savings as well as being able to take advantage of invoice discounting platforms which will help to improve cash-flow.
An e-invoicing system can help to retrieve money more quickly from your customers by sending an electronic invoice, rather than a paper based invoice which would have be sent in the post. If the invoice for some reason didn’t reach the intended person or got deleted, then it is easy to resend the invoice which will be received immediately by the supplier, helping to minimise time delays. E-invoicing will reduce the amount of money spent manually sending invoices in the post as well as other benefits such as:
- Improved supplier relations
- Improved control over key business processes
- Reduced data entry costs
- Improved level of service to internal departments
- Reduced document storage costs
- Reduced cost and time in resolving discrepancies
On the flip side, companies can also improve the quality of relations they have with their suppliers by using a solution like IMS to manage incoming invoices. When a supplier contacts the AP department with a query, the invoice and all accompanying details can be instantly retrieved. The query will be answered quickly and it removes the cost of calling them back. A supplier portal can be used so suppliers can access their own invoices online without having to contact the AP team.
Putting measures in place to help your Accounts Payable to efficiently process and create invoices will help you to stay on top of any late payments, as well as effectively managing the processing of your incoming invoices. If you are worried about late payments in your business, then think about how a complete P2P system could help your business.
To find out more about Documation’s Invoice Management Solution and the other products and services we provide, please visit www.documation.co.uk or email email@example.com.