E-invoicing is on the Government’s agenda. There’s to be a consultation on mandating e-invoicing. We’re behind the curve in the UK. Some businesses find they can’t export into markets where e-invoicing has been mandated or where it’s what the firms they wish to trade with use. We need to get with the programme. But how? Small businesses are worried about the costs and time, and that their customers all use different systems.
Several big firms that use e-invoicing, have had trouble getting their small suppliers to onboard to the platforms. Costs have come down and the onboarding is much less complicated than it used to be. I say: if you want your small suppliers to use your technology, work with them together to embrace and embed it rather than simply saying ‘you must sign up’.
Some small businesses have described e-invoicing systems as disingenuously complicated payment platforms that waste time and delay payments. That won’t cut it. Suppliers need someone to talk to when they don’t understand what they’re meant to do. A small supplier may be supplying many customers and dealing with several different platforms. A big customer may be very pleased with their single system.
At a cost to the UK economy of £27bn per annum, overdue payments (late beyond agreed due dates) are a significant threat to the stability of supply chains. Restricted cash flow creates uncertainty which injects stagnation into the heart of our entrepreneurial community, causing business failures, often at huge personal cost. E-invoicing, whether mandated or not, may be part of the solution.
The impact of e-Invoicing on reducing overdue (late) invoice payments
E-invoicing is not the panacea, but adoption can:
1. Prevent invoicing errors by ensuring consistent data throughout the process. Regrettably, a large proportion of paper invoices are submitted with errors and need to be corrected and resubmitted resulting in ‘late’ payments, e.g., if the Purchase Order (PO) contains a formatting error or missing information the resulting invoice may be rejected and cause payment delays. Where the PO is made available in the right format late in the process, even after goods are shipped, the invoicing and payment process will often be correspondingly delayed.
2. Reduce disputes about invoices submitted and reduce the possibility of invoices getting lost
3. Reduce the steps required in, and the length of time to complete, approvals processes
4. Reduce the possibility of fraudulent activity in firms
5. Allow suppliers to consider trading with countries where e-invoicing is standard
6. Achieve significant cost savings: paper/printing/manual handling/data entry/ archiving
7. Make it simpler to comply with the reporting requirement to count average days to pay and ‘late payment’ from the date of ‘receipt’ of the invoice
8. Enhance analytics and real time data related to business operations including payments, suppliers, carbon reduction/emissions, and enable proactive responses to supply chain disruption
9. Improve knowledge of, and build resilient relationships with, suppliers along the supply chain, leading to more resilient suppliers, more productive partnership working and collaborative strategic partnerships
10. The knock-on impacts include upskilling and reskilling of people within organisations, so they engage in activities that directly, positively affect the outcomes of the business. This has wide ranging benefits in terms of job satisfaction and attracting and retaining talent.
If your customer wants you to use their e-invoicing system, it’s worth putting the work in at the beginning to understand the system and how you will interact with it.
If you want your suppliers to use your e-invoicing system work with them to keep the costs down, make sure they understand and have the right support to get onto the platform, that they have someone to speak to if they need help.
Remember your suppliers may have lots of customers all with different systems. Make it as easy and affordable for everyone as possible.
On the other hand:
E-invoicing cannot change the culture in any organisation determined to hold onto payments despite negative impacts on suppliers. Some firms persistently offer long contractual payment terms. The supplier often accepts these, reluctantly or without full understanding of the implications for cashflow management, but mostly for fear of losing this and future pieces of work. These contractual payment terms are often extended at will or when the economic climate worsens, to protect the customer’s own business model, operations, development etc.
Even if you are onboarded to your customer’s e-invoicing system, if you have a contract that says you will be paid in 90 or 120 days, then don’t expect to be paid early. The system may clear your payment straight away, but the money will sit in the customer’s coffers until the end of the payment term. That means, in effect, your money is available to the customer to help them run their own business. You are acting as a bank. If you can overcome your fear of losing the work, try to negotiate better payments terms and get the money into your business quicker.
All the tech in the world can’t stop bigger customers refusing to negotiate better payment terms, and smaller suppliers accepting for fear of losing the work. That’s unfair payment terms. While research shows average days to pay and percentages of invoice paid after the due date coming down, it’s long extended payment terms in contracts that are unacceptable and need to change.
Only will, determination, ethical behaviour and a better understanding all round of the needs of smaller suppliers and the value of partnership working will shift that culture.
