Growth and Optimization
Prompt Payment is Changing – Here’s How Finance Automation Can Help
If you find yourself continually chasing late payments, you aren’t alone. The government estimates UK businesses are owed £23.4 billion in late invoices. Its Prompt Payment Code aims to solve the problem of late invoices owed to small businesses – and it’s just got even tougher.
It’s good news for accounts receivable. It’s bad news for accounts payable.
Among several changes, CEOs or finance directors (or business owners for small businesses) have to sign it personally. This is to ensure responsibility for payment practices is taken at the highest level of an organisation.
And perhaps toughest of all, from 1 July 2021 you are required to pay 95% of invoices from businesses with less than 50 employees within 30 days. (The target for larger businesses will remain 95% of invoices within 60 days.)
It’s also worth noting that the government is considering strengthening the powers of the Small Business Commissioner to ensure larger companies pay their smaller partners on time too. These include legally binding payment orders, launching investigations and levying fines.
You’re likely cheering from an accounts receivable perspective. But what can you do from an accounts payable perspective?
Not Late By Design
The truth is that your business isn’t paying late deliberately. You’re paying late because your AP system is too slow to be able to pay suppliers on time.
There are lots of reasons for this.
The approval process is often very slow – on average it takes a business 10 days to get an invoice through approval.
Then there are the invoices that get lost in the system – and over half of businesses say this is a problem.
And some AP teams simply get visibility of invoices far too late. How many times have you seen an invoice arrive in the department for the first time when it’s already overdue?
A process like this hurts your cash flow, as well as your suppliers’. In an ideal world, you’d have a clear picture of your upcoming liabilities so you could manage your cash flow accordingly. When your process lacks visibility, you spend a lot of time firefighting.
So how can you speed up your processes and gain more visibility?
Prompt Payment is Possible with AP Automation
An automated AP process saves you time at every stage.
With a tool such as Invoice Capture you can typically get back 70% of your invoice capture time, reducing data entry errors at the same time.
Fewer invoices get lost in the system when it’s automated – businesses using automated invoice management software see 60% fewer invoices misplaced.
With solutions such as Concur Invoice, approval times are transformed. Approvers can approve invoices on-the-go from their mobile rather than having to log into a separate system. You have full visibility of what’s going on too – you can see where an invoice is in the process and automated reminders prompt people when required to save you time too.
Overall, best-in-class businesses using AP automation are 24% faster to receive and process supplier invoices.
You can use automation to get more control of spend too. With Purchase Request, managers can approve or reject spend requests before a PO is created – and you can see spend before it happens. And SAP Concur cash flow forecasting software can give you accurate, near-real-time visibility into all spend and financial data.
AP Automation Puts You in Control
With AP automation in place, you have more control over your process. You’re equipped to be able to pay suppliers on time and you’re equipped to make informed decisions when it comes to your cashflow. To find out more about how AP automation can help, access our AP automation toolkit.
