As outlined in the previous blog posting, the UK government has created guidelines to help public sector organisations pay their contractors in a timely fashion – and those guidelines just got tougher.

Following the recent budget announcement, all central government departments are now required to pay 80% of all undisputed invoices within five days (see further reading, below). The target – although tight and considerably less than the standard invoice terms of 30 days – is more than achievable.

The success of certain trailblazing authorities shows that the target can become a means for ensuring public sector best practice, helping to smooth interaction and collaboration between councils and contractors. The key to achieving such best practice is automation.

More than just a nice-to-have objective, all 22 central government departments will be required to collate and report five-day payment performance from May 2010.

Central government organisations will also be expected to explore the option of moving to immediate payment through electronic invoicing for all suppliers. Such aims create a strong business case for government organisations that are wishing to implement electronic purchase-to-pay (P2P) processes.

Without automation, there is simply no way that public sector bodies will be able to meet ever-reducing payment targets. The onus, then, is on public sector FDs and IT leaders to automate timely payment – and there are a host of available technologies that can help push such a transformation.

Scanning purchase invoices and capturing the invoice data electronically can significantly reduce the time associated with manual processing. The documents held electronically can then be circulated quickly for authorisation and retrieved as required, allowing swift approval and high purchase-to-pay efficiency.

Such automation highlights how there really is no excuse for public sector organisations failing to demonstrate sympathy with wider government payment objectives. Faster, automated payments will help your organisation prove it is one step ahead of equivalent organisations in the enterprise sector.

And more than just a means to faster payment in a recession, automated P2P systems will help your organisation work more effectively and productively in the long term.

Further reading

http://www.ogc.gov.uk/whats_new_budget_2010.asp

Automate to achieve the government’s five day payment target is a post from Advanced Business Solutions - Supplier of accounting software, business intelligence and document managment

Large businesses, smaller firms and single contractors all innovate to speculate; they use the cash they earn to create new opportunities. Late payments create cash flow concerns that lead to a range of problems.

A reduced cash flow makes it harder to bid for new and upcoming work. And at a time of constrained economic conditions, a lack of incoming cash can make the difference between life and death – particularly for a small business.

Thankfully, the UK government recognises the concerns. Legislation is helping to ensure public sector organisations pay their suppliers in a timely fashion.

In late 2008, the government set out new guidelines that urged local authorities to settle invoices within 10 days and keep cash flow moving during the recession (see further reading, below).

The guidelines have helped cut payment times, but their implementation is far from the end of the story. Research from the Forum of Private Business (FPB) towards the end of last year revealed a tale of considerable differences in payment times (see further reading).

While some authorities settle more than 90% of their bills in ten days or less, other councils appear oblivious to the 10-day target. Overall, the average time local authorities take to pay invoices is almost double the 10-day target.

So much, then, for meeting the government’s aim of speeding up the cash flow to small suppliers. But there is a significant glimmer of hope at the end of the tunnel.

Success at trailblazer organisations has caused the government to return again to payment terms. These trailblazers make best use of available technology to ensure that payment terms are kept as tight as possible.

More than just a means of ensuring contractor survival, pressure on meeting the terms means firms that have taken advantage of electronic purchase-to-pay systems, including eProcurement, document management and workflow technologies, are best-placed to meet government guidelines.

And with more public sector guidelines recently unveiled (see next blog), FDs and IT leaders would be well advised to take a long, hard look at electronic procure-to-pay technologies.

Further reading

http://www.bis.gov.uk/about/procurement/prompt-payment/guidance-for-public-sector-organisations

http://www.ccrmagazine.com/index.php?option=com_content&task=view&id=2116

Prompt payment and the need for electronic purchase-to-pay systems is a post from Advanced Business Solutions - Supplier of accounting software, business intelligence and document managment