Adapting to the new ‘normal’
I think it is fair to say that no one saw the last four months coming. What started as a normal year, changed very quickly for everyone.
The Covid-19 pandemic has forced businesses across the UK to adopt a new style of working. Whilst working from home was already familiar to some, the majority of us had to quickly react to the change which proved to be particularly difficult, especially during a time when social activity was forbidden. For me personally, and I am sure many others, my home space soon turned into my daily workspace. Now, remote working and a 2m socially distanced conversation with friends doesn’t seem so out of the ordinary.
Whilst the pandemic caused a great sea of uncertainty, thousands of workers to be furloughed and retail and non-essential stores shut for months, how exactly did it affect large businesses and their payment culture? – it certainly didn’t improve their payment habits, that’s for sure!
No heroes to be seen
As shown in some of our previous blogs, large businesses have never been heroes when it comes to paying their suppliers on time. The Payment Practice Regulation [PPR] was a law introduced in 2017 requiring large organisations exceeding two of these three thresholds – £26m annual turnover, £18m balance sheet total, 250 employees – to report their payment practices every 6 months. Three years on, there still seems to be little sign of improvement.
Over the lockdown period, March to July 2020, I analysed the statistics to see if there were any changes to the late payment culture. The only positive change observed was a job that would normally take me an hour or two to complete soon became a 45-minute job due to the lack of reports for me to analyse…
Compliance for one is still a continuous problem, meaning large businesses are still failing to report to PPR. This, of course, makes my job easier, but also harder at the same time when it comes to my boss and colleagues asking me if there are any new trends or improvements… I find myself not having much to report back on.
However, what my analysis did show was for the large companies that did report: late payments got worse when compared to this time last year when business conditions and the economy was more ‘normal’. The table below summarises my findings.
Is this table a reflection on large companies? Does it prove they are struggling to work from home and in fact don’t have the right tools to facilitate the new world of effective remote working?
For large companies that are still paper-based, this may be a reason contributing to the increase in late payments. It soon becomes difficult for businesses to get the relevant invoices approved when their staff are all working in different locations and cannot see others outside of their own household during lockdown. A piece of paper that is normally passed to several people around the office is no longer possible unless posted to each individual of course. This, in turn, means that the whole process of getting invoices looked at by the right person, signed off for approval and onto the finance system ready for payment takes much longer, which is evident in the rise of late payments.
How can companies ensure they can work in the everchanging ‘normal’?
If not having the right tools and processes to work effectively at home is the cause of late payments, then the fix is easy: automate your Accounts Payable function.
Automating this process allows businesses to approve and process invoices easily and efficiently from anywhere, resulting in faster payments to suppliers. Automated solutions like Invu Verify can automatically capture relevant data from invoices, route it to staff electronically for coding and approval as well as posting it automatically into the ERP system ready for payment. This is all done whilst ensuring only the relevant people approve the invoices associated to their area of responsibility. The system will also check if the invoice is a duplicate invoice, preventing any duplicate payments to be made.
In my recent interactions with our customers, I’ve identified that around 3% of staff working with Document Management software have been furloughed. This is a huge difference in comparison to the 70% of UK companies who furloughed staff (The Guardian, 2020). Having the digital systems and processes in place to operate as normal may be one of the contributing reasons for this significantly lower number.
Our customers already had the systems, people and processes in place in order to work from home. This prevented invoice approval from being the bottleneck in the process meaning invoices were paid on time and supplier relationships were retained.
If you would like to take control of your invoices and pay your suppliers faster from anywhere, please contact us to learn how we can help you.