Back in October 2008 the Government announced a new 10-day target for payment of suppliers’ invoices. This target is part of its commitment to supporting businesses, by improving cash flow during the current difficult economic climate. The target applies to all central government departments and agencies.
But the Daily Telegraph in a January 2009 survey of all 400 England and Wales councils has discovered that more than 80 per cent of respondents admitted that they were not meeting the new 10-day target.
Some have argued that this is an indication that the Government’s policies aren’t working. On the surface this may be true – but it’s a somewhat simplistic response and it fails to address the question of why councils are not meeting this target.
Firstly, councils’ payment departments are being asked to meet this target without extra resources. A typical council may have 8,000 live supplier accounts and some have many more – that’s a lot of payments to process and without extra manpower this can be challenging. Many payment teams are undergoing training to help, but this is only part of the solution. Other departments within councils also need to play their part and ensure that they make all necessary invoice authorisations quickly. It’s a team effort because if the invoice sits on someone’s desk for two weeks the payment target will be missed, long before the payments team ever set eyes on the invoice.
But suppliers also have to play their part by helping to making sure that their invoice can be processed quickly. Alexis Collins, director at Accounts Training, says that it is surprising how many suppliers fail to provide even basic information such as their full company name, address and telephone number on their invoice. “The problem seems to be that tradespeople can deliver a fantastic service, but are not so great at the paperwork.”
Most councils operate a procure to pay process so if a supplier submits an invoice which differs in anyway to what was initially agreed, this will slow down the payment process. If the supplier fails to give the contact name of the person who ordered the goods or service and a relevant purchase order number the likelihood is that their invoice will not be authorized for payment and may even be returned to them with a request for the missing information, meaning that they will have to wait longer for their cash.
Alexis says, “We are working with the accounts payable teams of several councils to help them with ways to increase the likelihood of meeting this target. For suppliers who provide all the necessary information on their invoice, we believe this target is achievable and indeed we have seen it being met in practice, but there needs to be a greater awareness amongst small businesses as to what information they need to supply in order to ensure that they get paid for their services quickly.
© Accounts Training Ltd 2009
A users-guide to “How to submit a correct invoice and be paid on time” can be seen at www.AccountsPayable.co.uk
For further information on training for accounts payable teams, contact Accounts Training: t: 020 8332 7567 e:info@AccountsTraining.co.uk
