Improving payment times

Review your supplier set up process for first time invoices.

Ensure your supplier set up requirements and related security requirements are fit for purpose. You may have unnecessary validations which are no longer best practice. Review and test your rules and validation regularly. 

Appoint an executive sponsor tasked with implement and monitoring changes to speed up payment times.

Ensure there is sponsorship at a senior level to prioritise faster payment. The sponsor is usually responsible for signing out any commentary, and any follow up activity, should your agency consistently not meet the payment time targets. 

Consider using consolidated electronic invoices (such as an import file).

Take centralised coding and approval of invoices for high volume transactions one step further and work with the vendor to receive the data digitally. Process these transactions as a consolidated electronic invoice. 

Consider centralised coding and approval of high volume, low value, invoices.

Invoices for high volume transactions that span your business may be best processed centrally via a consolidated invoice. 

A cleaner chart of accounts with documentation for coders and managers helps ease the invoice process.

Is your chart of accounts easy to access? Does it have clear and concise description? Review this annually. 

Ensure timely and appropriate controls are in place and adhered to for invoices in dispute or noncompliant invoices.

Problematic invoices are sometimes not put into dispute, or a credit note has not been requested. Ensure adequate policies, communication tools and controls are in place to avoid this. Note that disputed invoices are or can be excluded from reporting thresholds. 

Ensure temporary financial delegations are set up when an invoice approver is away on annual leave.

Review your applicable policies, communication tools and controls to ensure they are fit for purpose. Audit noncompliance and communicate with poor performers. 

Review your user profile management process for staff changes and delegation database updates.

Ensure you have a robust user profile management process, so that your people can easily find and understand when staff are onboarded, offboarded or if there have been movements across your organisation. 

An up-to-date financial delegations database or integration to your HRIS can help avoid a scenario where the offboarding or staff movement process was not followed and an invoice is submitted for coding or approval to a staff member who has left your organisation or moved teams. 

Review your guidance and communication tools for suppliers so they are aware and encouraged to communicate changes regarding their bank account, GST numbers or Withholding Tax information.

You can encourage faster invoice processing through education and awareness with your suppliers about information their invoice should contain.

Suppliers should be encouraged to provide valid invoices that align with IRD requirements and your internal system or manual validation requirements. 

• Ensure suppliers provide the required supporting documentation. 
• If you use an invoice scraping tool, encourage your suppliers to not alter the format of their invoices. 
• Discourage your suppliers from issuing invoices before completion of the service. 
• Ensure your suppliers send invoices to the correct agency and the address details are correct.

Ensure that your valid contract or other preapproval processes are adhered to.

Those responsible for requisitioning or providing pre-approval should be empowered and educated to follow your internal processes and use your tools. 

Provide timely and accurate invoice reference information to your accounts payable team.

If an invoice does not have the required or accurate reference information, ensure invoice coders or approvers are empowered and educated to provide this information to your accounts payable team in a timely manner. 

Provide accurate invoice reference information to suppliers when goods or services are requisitioned.

Requisitioners should clearly communicate invoice requirements to suppliers at the time of purchase. For example, they should provide the correct cost centre, account code, purchase order number, contact name, and confirm where or how to send the invoice or eInvoice. Referencing your finance systems supplier number can also speed up processing times. 

Automate workflow reminders for items waiting to be coded or approved. 

Consider implementing automated workflow reminders within your system if you do not have them set up already. Invoice coders or approvers often need reminding that there are items requiring action. Reminders sent every three days are common. 

Encourage faster invoice processing through reporting and accountability.

A major cause of delays is due to invoices sitting with the business for coding, approval or goods receipting. Consider commissioning a report to track and monitor processing times by business area. A RAG (Red, Amber, Green) report can be effective and tabled at appropriate meetings. 

Organisations who have prioritised faster payments regularly monitor performance at their top management table. Consider KPIs for responsible parties and incorporate this into their performance discussions and annual review outcomes. 

Identify root causes and offer solutions to resolve such as following up with poor performers, offering additional training and ensuring internal procedures are clear and up to date. Task your accounts payable team to follow up with actions. 

Encourage faster invoice processing through education and awareness with your team.
Everyone who helps process an invoice should understand their responsibilities and how to use the required tools. 

• Ensure your online resources and procedures are easy to find and follow. 
• Run regular training sessions. 
• Highlight the importance of receipting goods and giving the supplier accurate reference information. 
• Celebrate high performers.

Empower your accounts payable team by sharing your progress towards the 95% / 10-day target. 

Some accounts payable teams have said they are motivated by the 95% / 10-day target and how they are tracking against other agencies. Share quarterly updates and celebrate success. 

eInvoices can be processed faster as the data arrives directly in your finance system. As the data is structured, errors are less likely and suppliers can be paid faster. 

Most agencies who are meeting the 95% / 10-day target use purchase orders for the majority of their invoice types. Purchase orders mean invoices are preapproved which speeds up payment times. 

Purchase order systems are worth considering if you have a high volume of invoices. Be prepared for processing to temporarily slow down while the new process is embedded with your people. 

You may have an aging finance systems environment which is due to be upgraded or replaced. Consider fast tracking this work so you have a more fit for purpose environment to enable faster payment to your suppliers. 

If you haven't already, change your system configuration to all invoices are set to "pay now" based on the invoice date regardless of the invoice due date. 

Move to daily payment runs if feasible. Best practice is a minimum of three payment runs per week. 

Payment runs can be time consuming due to the various validations and spot checks required. Consider spreading the load and recruiting people in your wider business to support the process. Run a pool where business reviewers take their turn at validating and approving components of your payment runs. 

If you use an automated invoice data capture/OCR system, make sure it’s optimised as much as possible. Ask your provider whether they can also support eInvoicing (so structured invoice information can be directly received), and/or other tools to scrape invoice data more accurately (some providers now use tools with artificial intelligence for this purpose).

If your existing contract is up for renewal, consider going to market. Review the validation rules applied by your scanning provider and consider removing any unnecessary blockers. 

Some organisations have ‘bolt-on’ contract management systems. Does your main invoicing system now provide a contract management system add-on that is worth exploring? Contract management systems are useful to provide audit background to enable faster approval of an invoice. 

Do you have an outdated invoice receipt process where suppliers send invoices directly to business contacts who then arrange for coding and approval prior to being sent for payment? Best practice is a centralised mailbox where suppliers send invoices. They are then integrated and go through workflow or are entered into your finance system and then go through workflow via an electronic coding and approval or purchase order process. 

Good electronic workflow systems can result in more accurate monitoring and performance data. 

Utilise the New Zealand Business Number (NZBN) database to update your supplier master data.

The NZBN provides accurate, up-to-date supplier information and is also the eInvoicing ‘phone number’ required for exchanging eInvoices. Ensure your supplier master data is up to date. 

If your supplier master data is known to be out of date, consider a programme of work to update and cleanse the data and repeat at regular intervals (such as a regular download of NZBN data to help maintain your supplier records).

Review your end-to-end procure-to-pay (P2P) process and associated software.

After taking these suggestions into consideration, initiate a review of your P2P process and software. This will help identify opportunities as well as any pain points which are holding up invoice payments, such as opportunities to standardise business processes related to your workflow system.

Explore your finance systems environment for any functionality to further assist your P2P processes.

You may find you have functionality already in your finance system which can easily be unlocked and/or configured.