By Anu Linjamäki, Product Marketing Manager, Basware
This morning, with my Basware hat on, I was pleased to learn that big businesses are improving their payment times, according to an article in The Telegraph. The article quotes research from Experian, which found that businesses settled their bills 1.3 days earlier in the third quarter of this year compared to the same period in 2011.
It’s a step forward from the growing culture of delayed payments that I discussed back in August, when research from Bacs Payment Schemes found that the amount owed to Britain’s small and medium-sized enterprises had climbed to a record £36.5 billion.
Clearly, though, there is still work to be done to make sure that cash-flow meets the needs of all businesses – big and small. Experian findings show that large companies are often the culprits for these slow payments, meaning that payments are still being settled on average 24.88 days beyond agreed terms.
Despite the signs of improvement, this is still a worrying trend for SMBs. Smaller businesses often lack the depth of resources/capabilities that larger businesses do for tracking down open invoices and pushing for collections. Although over 1,000 UK businesses signed-up to the Prompt Payment Code formed in 2009, clearly other options must be explored to make sure that SMBs can stay afloat in this tough financial period.
What should SMBs be doing to counter this problem? Put simply, they need to reduce the barriers that cause delayed payments.
Step one should be to eliminate the paper-based ‘mailroom’ processing of invoices. Governments are increasingly mandating that their suppliers invoice them electronically, to remove the time and resources needed to process them. SMBs should action this by moving to a billing system which allows e-invoicing and therefore allows customers to be invoiced quickly, in a traceable way that reduces the resources required to process documents – thus speeding the payment process on both sides.
The transparency of finances means supplier and buyer alike will have better visibility of cash-flow, avoiding cash being tied up in limbo. A good invoice automation software provider will provide all-round capability for buyers - allowing close monitoring of payments, as well as social collaboration tools that enable both buyer and supplier to collaboratively resolve billing disputes. For suppliers it is also valuable, if their customers are able to provide self-service tools to check the processing status of their invoices.
Ultimately, e-invoicing is able to remove some of the barriers related to delayed payments. It provides a consistent and convenient format for the buying organization to process incoming invoices – minimizing delayed payments and maximizing the likelihood of companies getting what they’re owed sooner rather than later.