When it comes to B2B businesses the invoice lies at the very heart of the payment process. Without one orders shouldn’t be processed (but often are), and suppliers can’t get paid. Where once invoices were primarily physical, they increasingly appear as PDF attachments as more and more business transact online. However, as this short article describes, it is now time to consign them to history, sitting alongside faxes and cheques as remnants of a different business era.
For most, companies paying other companies is currently a highly inefficient process. When a company receives an invoice someone in finance needs to check if this is indeed what was ordered and what was received. If there are differences, it often takes a while to figure out why there is a difference, which in turn can lead to late and/or incorrect payments.
If one could trace the journey of an invoice, the number of miles they clock up can be considerable. They are subject to routing around the web, and rerouting much like the bytes that flow from computer to computer. They arrive in inboxes where the recipient has no clue as to what they relate to, and in some instances sit in unmanned email accounts where the owner has taken two weeks off meaning they can’t be processed.
Information about what was ordered on what terms, and what was received resides in different emails and documents including the contract, quote, purchase order, receipt note and invoice. There is no single place where everyone can get a real-time status update for an order. This not only slows down payments, but it also increases the likelihood of disputes and fraud. For the finance team, the process is opaque, resulting in less visibility as to current cross-departmental spend, as invoices can appear ‘out of the blue’. In short, lots of inefficiency, and lots of area for improvement. When you are dealing with high volumes of invoices, with multiple suppliers the pain intensifies (for example with big projects like a commercial development).
They are also the source of much frustration for suppliers as they await payment. Days turn into weeks and weeks into months. Is it any wonder that payment terms are the source of so much frustration for the majority of businesses where cash-flow relies on cash injections in a timely manner? Why does this matter? Well if you want to maintain good relationships with your suppliers that lead to sustainable businesses it is important.
Rachel Reeves MP, said: “Small and medium-sized businesses (SMEs) are vital to the health of our economy, providing jobs and prosperity to communities up and down the country. “But many SMEs are placed in a stranglehold by larger companies deliberately paying late and ruthlessly taking advantage of their suppliers, causing these firms financial instability. “Unless the Government levels the playing field and acts to bring in a tougher regime for poor payment practices then we choke off the opportunity for SMEs to invest and grow in the future.” The Federation of Small Businesses (FSB) said that eliminating the “scourge” of late payments alone would save 50,000 businesses each year. Sky News (December 2018)
Of course, the invoice process alone is not the sole cause of the above problems, but they definitely play a part in extending the delays. This entire process also serves to generate more and more email, as the various agents look to resolve resultant issues. For example, an irate supplier chases payment from the internal buyer, who then needs to escalate to finance who are already dealing with overflowing inboxes. Cue frustration all around.
In recent years, a more troubling issue has arisen with invoices, the growth of invoice fraud. Invoice fraud occurs when emails get hacked and fraudulent PDF’s are submitted for payment, where the beneficiary account is fraudulent.
“Invoice fraud is on the rise, as technology brings with it new opportunities for fraudsters as well as for legitimate businesses. Of those affected, one in six believes the fraud has cost more than £5,000 and 54 per cent of business leaders view it as their single biggest threat.” Real Business (February 2018)
Instead, if you include the supplier in the end-to-end process, with real-time interactions rather than merely relying on sending documents around (paper-based or electronic), then the opportunity for fraud is minimised.
In short, the whole B2B payment process is extremely inefficient, increasingly vulnerable to fraud, and represents a frustrating experience for everyone. However, it does not have to be like this.
Software Disrupting Processes
In recent years there has been an increase in the number of software apps eliminating efficiencies in various back-office functions. Expense management is a prime example. Where once the process entailed receipts being stuffed into envelopes, being processed manually by the finance team, modern solutions automate the entire end-to-end process. Companies like Yordex represent the latest breed of innovative applications, as their next generation spend management and B2B payment software helps companies transform the finance function.
The key benefits of solutions like Yordex’s are pretty compelling including:
1. Time savings – Save up to 75% of time processing POs, invoices and payments
2. Increased visibility and control over spend and suppliers
3. Improvements to working capital
4. Reduction in payment costs
5. Reduce errors and cut invoice fraud
In short, the days of frustration associated with invoices and B2B payments can be consigned to history.
Summary and Conclusion
For those working in the finance function in medium sized businesses, the current process for managing invoices is ripe for disruption. While some larger players have tackled the area with hybrid ERP solutions the entry level price point for these systems can be eye-watering. Innovative solutions like Yordex’s are designed for those with more modest budgets, and because they are designed with UI/UX in mind they are easy to use and to deploy.
Much like cheques, faxes and expense receipts have been replaced with more efficient solutions, spend management has caught up.