8 min read
18 Apr 2019
8 min read
18 Apr 2019
In any buyer-supplier relationship, there may be times when a supplier’s invoice approval is delayed. Further, invoices may be rejected for various reasons. Maybe the relevant goods are defective or haven’t arrived yet – or maybe the price given on the invoice doesn’t match the price on the purchase order. Whatever the reason, suppliers need to know why an invoice hasn’t passed muster so they can correct the error and, if needed, submit a new invoice.
But all too often, suppliers simply aren’t made aware of why an invoice remains unapproved until the expected payment fails to materialize, meaning the payment may be significantly delayed. The supplier experience can also be hampered if invoices are rejected without a clear reason, potentially leading to frustration and wasted effort as the supplier tries to fix the error.
Both situations can lead to late payment of invoices and unpredictable cash flow. For small suppliers, the consequences can be particularly dire: a report published in 2016 by the UK’s Federation of Small Businesses (FSB) said that 50,000 companies would have avoided going out of business in 2014 if they had been paid on time.
Suppliers, and small businesses especially, feel the impact of late payments in many ways, but it’s not just them who suffer. The disadvantages of late payments can impact buyers, too. These are some of the biggest potential downsides for both suppliers and buyers:
Cash flow is king, especially for small suppliers. A healthy flow of working capital ensures that they can meet their obligations and continue to operate effectively. Receiving payments late, no matter what the reason is, can make their life very difficult. If payments are delayed at a particularly bad time, their ability to restock, reinvest in growth, or repay debt can be affected – none of which is good for operational health.
Late payments can also cause damage to the relationship between buyers and suppliers. It’s not lost on suppliers that up to a quarter of SMEs are put at risk of insolvency by late payments, so the threat of not being paid on time is often an existential one. It stands to reason, then, that refusing to take steps to minimize the threat of late payments can be a drain on a relationship. It should also be clear that damage caused to a supplier, especially one that’s central to the buyer’s operation, is damage caused to the buyer, too.
Furthermore, the damage caused by late payments doesn’t necessarily stop at the supplier who’s owed them. Supply chains are complex and intricate vertical networks of businesses, who are all in some way reliant on each other. A payment missed to a supplier has the potential to ripple through the entire supply chain, causing a domino effect of late payments that can push a cash shortfall all the way down to the bottom.
Ripple effects can be present in more than one sense as a result of late payments, too. Developing a reputation for not paying invoices on time can be harmful to future prospects, both for expanded relationships with existing suppliers and for forging relationships with new ones. The supplier/buyer relationship is a mutual one, and although a lot can slide in the name of ensuring business-as-usual, if late payments pose an existential threat to a supplier, they’re not going to be keen to work with a serial late-payer.
The good news is that Taulia has a feature called Invoice Status Description that allows you to inform your supplier about the reason for the invoice status. The feature is most commonly used for invoices with “In Process” or “Rejected” status:
The ability to customize reasons for “In Process” or “Rejected” status may be particularly valuable if you are using a workflow tool, which may require multiple levels of approval or query invoices over a certain value threshold. This includes ERP-integrated workflow solutions: by harnessing the codes included within the solution we can provide suppliers with meaningful information via our portal – thereby avoiding time-consuming communications with suppliers.
For suppliers, this facility is invaluable: the sooner they know that an invoice is rejected – and why – the sooner they can submit a replacement invoice and get paid. They will also be better placed to ensure replacement invoices are correct if they are given meaningful reasons for rejection. Both of these can minimize the risk of being affected by the potential negative impacts of late payments.
Furthermore, if you use Taulia in conjunction with an early payment program, speeding up invoice processing means you can leverage supplier invoices sooner within your working capital strategy – thereby improving your ability to unlock working capital within your supply chain.
Buyers and their suppliers both stand to benefit from clearer communication – so how can you make sure you are using Taulia’s capabilities to communicate with suppliers as effectively as possible?
Taking full advantage of this tool can make a real difference to suppliers – indeed, we’ve received numerous testimonials for suppliers about the benefits of receiving invoice status information from their customers, praising Taulia’s “ability to view invoice status at any time” and “simple and clear reasons for non-payment”.
Invoice Status Description is just one of the ways that Taulia supports seamless sharing of information between buyers and suppliers. Buyers can also exchange messages with suppliers on our platform, ensuring that all communications are kept in one place. And we’re continuing to invest in technology that can streamline and speed up invoice processing, while supporting collaboration and enabling easy supplier management.
A recent milestone was the announcement of our partnership with Google to build an end-to-end AI-powered invoice automation solution, Cognitive Invoicing. Harnessing the OCR capabilities of Google’s Document Understanding AI, the solution will capture information from all types of invoices, including machine-generated PDFs and scanned image PDFs. Cognitive Invoicing will also enable buyers and suppliers to resolve any queries collaboratively – further enhancing the buyer-supplier relationship.
While invoicing errors are a fact of life, the way in which you handle them with suppliers can make a big difference to the overall process. Clear status information keeps suppliers better informed about cash flow, helps suppliers fix problems faster – and, potentially, reduces the likelihood of future errors. What’s more, by highlighting errors proactively, we can minimize the impact of invoicing errors or approval delays – meaning your suppliers can still be paid promptly.