All businesses want to be paid fairly and on time for the work, goods and services they provide. You wouldn’t expect to do your grocery shopping and then pay for it 3 months later, so why should it be any different when you receive a supplier invoice? According to a report by Bacs Direct Credit, 76% of UK businesses are now forced to wait at least a month beyond their agreed contract terms before being paid. This culture of late payment has a knock on effect for the whole supply chain with many business owners having to make tough decisions in order to stay afloat.
- 20% of Directors have taken pay cuts in order to keep money in the business
- 26% of businesses rely on their overdrafts to stay in business
- 23% of small firms have paid their suppliers late due to business cash flow issues created by outstanding payments
- SMEs face additional costs of around £677.00 a month which are directly attributable to late payments. 63% of these are associated with administration time spent chasing late payments
- 25% of SMEs state that £20,000 or less is enough to jeopardise their business prospects
But what are the dangers for those businesses that are late paying their invoices on a regular basis?
As a purchaser, it is your responsibility to comply with any payment terms that you agree to.
Failure to pay your invoices on time could result in the following:
- It could damage your relationship with your suppliers. Your account could be placed on hold preventing you from purchasing business critical supplies when you need them. In addition, the way you manage your purchasing/sales relationship has an impact on your profit margins. Late payments prevent you from taking advantage of any prompt payment discounts on offer.
- It could damage your company’s reputation – if you are seen as untrustworthy, people may not want to do business with you. It could also be taken as an indication that your business is in difficulties.
- It could adversely affect your company’s credit rating making it difficult to open a credit account in the future.
- You have a legal obligation. New government legislation introduced on 25 February 2015, dictates that every business in the public sector supply chain MUST comply with 30 day payments terms. Public bodies MUST also publish an annual late payment report making their accountability more transparent.
- You could be charged interest for every day you exceed the agreed payment terms. In accordance with the Late Payment of Commercial Debts government regulations, businesses are entitled to charge 8% above the Bank of England base rate (unless there is a different rate of interest in a contract). This could really add up in a very short space of time.
- Late payment is considered a breach of contract. It could eventually result in losing the contract and legal action.
- With multiple unpaid invoices you don’t have a clear picture of your company finances and financial obligations hindering your ability to make smart financial decisions.
- It negatively affects the UK economy as a whole, restricting business growth, and hindering new business opportunities.
How can an Automated Invoice Processing solution help?
If your company needs a smarter, faster, streamlined approach to invoice processing, an Automated Invoice Processing solution could be the answer.
Automated Invoice Processing solutions can capture, extract and validate invoices as they arrive, either electronically or as paper documents. Information contained within the invoice is translated into digital data which can be uploaded into any system. Many solutions will integrate with your in-house ERP system – a must for improving accuracy and efficiency. Not only does this eliminate the need for repetitive manual data entry, it also forms the basis for automated matching and workflow based authorisation processes. A process that used to take multiple steps from receipt of an invoice to approval and payment, can now be completed in seconds, saving your business time and money, simplifying monitoring and reporting, and dramatically improving accuracy and efficiency.
With accurate financial data at your fingertips, you will always have a clear picture of your company’s finances and financial obligations.
If you would like to find out more about how Automated Invoice Processing solutions can benefit your business, please get in touch on 01285 810606 or email firstname.lastname@example.org – we look forward to talking to you.
Working with companies such as Invu, Abbyy, Draycir, Complytrax, Microsoft and Fujitsu to deliver business critical software and solutions to organisations from 3 to 3000 users, YourDMS provides bespoke, efficient document management solutions to companies seeking to reduce costs by improving their data capture, workflows, print reduction and email management.