We are delighted to welcome a guest post from one of our UK-based readers: Stephen Carter, eInvoice, Open Account & Supply Chain Financing Expert at Basware.
With both the European Commission and Central Governments legislating for eInvoicing adoption, why are we still not seeing mass take up? All too often the reason is sited as ‘poor supplier adoption,’ but is this really the case? Or is it, in fact, closed or poor procurement processes that are the real problem?
It’s obvious that if eInvoicing was going to make suppliers money, they would all be doing it. Instead, suppliers are often faced with a push from their large buyers without any benefits. All too often buyers try to force suppliers to move to eInvoicing without even the benefits of prompt or early payment. Even worse, some impose solutions that actually increase the cost of sale for the supplier. Others have forgotten that the supplier actually runs a business and has other customers. These are all symptoms of procurement not understanding their supply chain and the ‘customer is always right’ attitude.
Yet, regardless of the failings of procurement to treat suppliers as equal partners, many suppliers are moving to eInvoicing – often based on PDF’s via email. Why? Because they recognise the benefits of delivering invoices faster, reducing their cost of sale and making it easier to chase prompt payment – all of which will down their Days Sales Outstanding (DSO).
If suppliers are willing to make the move to eInvoicing, why is procurement struggling to get adoption? To understand what’s needed, buyers need to ask themselves the following questions:
- Do I make it easy for the supplier to submit good quality eInvoices by sending good quality purchase orders?
- Do I give the supplier choice in how they send in their eInvoices (for example by PDF)?
- If the supplier sends me a good quality eInvoice, will I pay it on time?
- Do I give the supplier visibility of the eInvoice status to cut down the cost of enquiries?
- Can the supplier still offer an invoice discount to get early payment?
To drive supplier adoption, procurement must be able to honestly say ‘yes’ to all of these questions. Importantly, by addressing these points, the buying organisation will see further dramatic downstream benefits from eInvoicing. Possibly even turning procurement into a profit centre through discounts, payment card rebates and fraud reduction.
In the UK, new legislation doesn’t support the endemic ‘customer is always right’ attitude. Changes to the Prompt Payment code create a compelling reason to drive improvements in procurement. For the Public Sector and its suppliers, invoices should be validated within seven days and payment of undisputed invoices should be within 30 days. With statutory penalties of at least 8% automatically applied on late payment, there is a clear cost of poor practise. There are always caveats, but this finally imposes a structure on procurement – only within the government supply chain. Interestingly, organisations should have adopted these new measurements around invoice payment from the 26 February 2015.
It is too early to say if these changes have made any impact or even been widely adopted. However, only with eInvoicing adoption are these new targets easily achieved. At the same time, there are new ways for procurement to capture income – through early settlement discounts and payment rebates. Whilst suppliers get earlier access to cash and by supplying high quality invoices, disputes and credit control cost go down – payment is all but guaranteed.
Regardless of legislation or buyer mandates the answer to drive eInvoicing is basic economics. It could cost you to pay late, and you make money if you pay early. Using eInvoicing to make it easier to do business and paying faster based on quality of invoice, maximises income from your cash – without paying late. Money talks.