By Anu Linjamäki, Product Marketing Manager, Basware
As an e-invoicing professional, I was interested to hear about the research findings on delayed payments by Bacs Payment Schemes in The Times yesterday. In total, the article suggests, “the amount owed to Britain’s small and medium-sized enterprises has climbed to a record £36.5 billion in the past six months”.
In a time of economic uncertainty, delayed payments are pushing smaller businesses to the point of collapse. On average, six out of ten SMBs have outstanding debts, amounting to £36,000.
This “growing culture” of delayed payments is truly worrying for small businesses, which often lack the depth of resources and capability that larger businesses do for tracking down open invoices and pushing for collections. While over 1,000 UK businesses have signed-up to the Prompt Payment Code formed in 2009, this increase in delayed payments shows that other options must be explored for SMBs to stay afloat in this turbulent time.
To that end, what do SMBs need to do to correct this pervasive problem?
Looking back to Basware’s Cost of Control Disrupted Networks research, 59% of finance executives believe the visibility of supply chain activity and supplier payment is becoming more difficult due to the increasing complexity of supply networks. I think it’s essential that SMBs develop billing methods alone or in co-operation with their customers that minimize the risk of delayed payments.
The first step here should be eliminating the paper-based ‘mailroom’ processing of invoices. We’re increasingly seeing governments mandate that its suppliers invoice them electronically, to remove the time and resources needed to process them. The aim is to have a positive effect on the due date that invoices are approved by. SMBs should take note here by moving to an e-invoicing system which allows customers to be invoiced quickly, in a traceable way that reduces the resources required to process documents both on the supplier’s and customer’s end and thus speeding the payment process.
The transparency of finances provided by invoice automation systems means that buyer organizations using such solutions will have better visibility of cash-flow, avoiding cash flow ‘myopia’ – cash being tied up in limbo. A good invoice automation software provider will also provide all-round capability which allows close monitoring of payments, as well as social collaboration tools that enable both buyer and supplier to collaboratively resolve billing disputes by accessing a live audit of the status of invoices.
In essence, e-invoicing is able to remove at least some of the barriers related to delayed payments. It provides a consistent and convenient format for the buying organization to process incoming invoices, therefore minimizing this problem of delayed payments and maximize the opportunity of companies getting what they are owed sooner rather than later.