Making Creditor Payment Simpler and More Accurate
This project improved cashflow, reduced wasted admin time, and improved supplier relationship.
There are many hidden costs to creditor payment. Often these relate to the time spent handling exception situations
When dealing with payments to suppliers other considerations can affect a simple process to reduce efficiency.
- Handling disputed invoices
- Cash flow management
- Payment terms the Supplier will accept
One customer has used some neat tricks to automate the process yet remain in control of cash flow.
The only manual procedures left in the entire process are updating the dispute status on purchase invoices on Sage, uploading and authorising payment files to the bank and writing the occasional cheque (very rare now!).
The surprise benefit was that suppliers will accept de-facto slightly worse terms than previously because the payments process is now much more predictable and reliable.
Payments are being made in multiple currencies.
The system uses information stored on Sage Line 50 to automatically
- Create a predicted payment schedule on the 22nd of the month for the following month
- Create payments in 3 batches to be made on the 4th, 15th and 28th of the following month.
- Queues remittance advices for transmission 3 days before the payment is to be made
- Sends dispute emails to alert suppliers which invoices will not be paid
- Generates reverse statements for Suppliers so that they alert the Customer if invoices are missing from the system.
- Generates payment files for each currency for each run date
- Makes the payment postings in Sage
Sage Line 50 has 99 dispute codes. Invoices with lines marked as disputed are not paid. Dispute code descriptions contain meaningful information about the nature of the dispute. Dispute codes above 10 automatically trigger emails to the supplier with the description from sage. The description includes the email address of the person within the organisation who is responsible for resolving the dispute.
The result is that the onus is on the supplier to respond and his response will be directed straight the person responsible.
Remittances are carefully timed to go out 3 days prior to the payment. This means that chasing calls are significantly reduced. The terms are judged to be the maximum the supplier will bear, if the remittances were sent out earlier it might trigger a call to insist on payments closer to terms.
On a monthly basis the supplier is emailed a statement of understanding. The statement details all the purchase invoices currently on the customers Sage system. The responsibility therefore falls on the supplier to check that it matches their records and that the Customer has not missed any invoices.
The projected payment report on the 22nd allows time for invoices to be disputed for cash management purposes before the 28th cut off. Dispute codes below 10 do not generate an email to the supplier so cash flow can be managed using these codes.
Creditor Payment Automation – Summary
The creditor payment system is geared towards putting as much responsibility for action on to the suppliers. It is designed to reduce as much as possible incoming payment chasing calls. Reductions in people time answering queries, generating reports, checking and validating information means much of the hidden cost of the process is removed.
Being reliable and predictable plays a major role in this process. This enables the customer to behave like larger organisations that use EDI to make their small suppliers to do as much work as possible.
The system was modelled using the Orbis Task Centre product. Orbis is a very cost effective tool for automating process for organisations of any size.