The Prompt Payment Code has been around for a few years now, setting out principles for businesses to follow when dealing with and paying their suppliers. To date, around 1800 businesses and public authorities have committed to the PPC.
I believe Prompt payment can make all the difference to small businesses, boosting their cashflow and allowing them to invest in growth for the future. Although we have seen some progress, there are still too many business owners across the country who have not been paid on time by their customers.
Margot James, Minister for Small Business, says: “We need a culture change to stamp this out and the Prompt Payment Code continues to play an important role in bringing this about, alongside a package of measures taken forward by government and industry.”
A culture change. That’s an interesting term. I believe the Minister is probably right, we do need a culture change. The mindset of some businesses will need to change and peer pressure through culture change is one way to do this. However, we need more than that if the Prompt Payment Code is going to become widespread.
To say “we need a culture change to stamp this out” is fighting talk, but it also suggests that organisations are not complying with the Code only because they don’t care about paying late. Which is simply not true.
For many organisations, it isn’t a lack of desire to comply, it is a lack of ability. The Prompt Payment Code is just not within their grasp because of inefficient processes, not that they are somehow underhanded or think suppliers undeserving.
Imagine if you will, where processes are such that suppliers are sending in paper invoices, finance teams are keying in each line of data to their systems, and rekeying where mistakes are made, then the paper invoice gets copied a few times and sent to various people in the organisation for different stages of approval. When all necessary approvals have been made the finance team then need to process the invoice for payment.
With the best will in the world, this process takes some time; people may be out on the road, working remotely, bogged down in their own day-to-day work and not prioritise approving the invoice. The paper copy gets lost and finance need to re-copy and send out again, assuming they have not lost the original and need to go back to the supplier.
Without proper processes and the right technology in place, the Prompt Payment Code remains nothing but pie in the sky for many organisations and no amount of culture change will ‘stamp this out’.
In the above scenario, the organisation was receiving paper invoices and then having to key and rekey the information in to electronic systems for processing. What if you could remove this stage? And suddenly the Prompt Payment Code isn’t such a pipe dream.
But how to remove that stage? E-invoicing solutions are just not viable for so many organisations either because of the technology changes (aka costs) involved or the duplication of effort for suppliers (aka why would I create my invoice in my system and then do it all again in your system). If only there was another way…
Well, there is another way. Put simply – suppliers create their invoice, they then convert it to a PDF and email it over. The latest e-invoicing technology can take the data and put it straight into the buyer’s finance package.
And I say ‘put simply’, but actually that is it. A supplier does nothing different except PDF their invoice (which their own finance package is likely can do) and then email it over. And for the buyer the time-consuming rigmarole of keying and rekeying in data is removed. There are no more paper invoices to hold on to or to potentially lose. The data is all held electronically.
As well as saving money on accounts payable processing costs, a buyer helps to keep their suppliers in business by paying them on time (cash is king). This maintains a broad base of suppliers to choose from and keeps service and product prices competitive.
So, it is a small change. But a small change that has a big effect both culturally and economically. And one that could take the Prompt Payment Code to a new level of widespread acceptance.
About Richard Manson
Richard Manson is CloudTrade’s co-founder and Commercial Director. Richards career has centred around the arena of Finance and Procurement optimisation for the last 15 years. Much of this time was spent as a management consultant with KPMG Consulting, where he was technical and pre-sales lead for their e-Finance and e-Payables propositions and implemented solutions into companies such as: Airbus, Astra Zeneca, Shell and Unilever.
Richard Mansons core responsibilities include defining and delivering marketing strategy, business development and alliance management. Prior to co-founding CloudTrade, Richard worked for Parseq, a Business Process Outsourcing organisation specialising in optimising customers Finance and Procurement functions using technology and outsourced services.
About CloudTrade
CloudTrade is one of the fastest growing e-invoice and e-document networks, connecting over 120 organisations to thousands of their trading partners electronically across numerous sectors and regions across the globe. Founded in 2010 to offer a fresh approach to e-invoicing, CloudTrade enables companies to evolve past their reliance on paper and trade electronically with their suppliers, irrespective of size or technical maturity. CloudTrade’s unique, patented technology, delivers services not widely seen in the market, in a cost-effective way. CloudTrade’s software is protected by lasting patents in Europe, the US and Australia. For further information go to: http://www.cloudtradenetwork.com/
Do you need help to accelerate your Accounts Payable process? Find out how CloudTrade removes the barriers to high-adoption e-invoicing.
Read how our Channel Partner Science Warehouse helps businesses to drive productive change and meet the Prompt Payment Code.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now