You might also be interested in
Replies (9)
Please login or register to join the discussion.
I welcome the suggestion to show the percentages of invoice payments in the different "delay bands", but I am not sure what good an overall 'average' will provide.
We all know an average means little unless we also know about the spread of the numbers from which it is calculated. For example, knowing the average human being has one ovary and one [***] doesn't tell you much about human anatomy!
David Winch
Sales & Marketing Consultant
Cambridge
Many ways for the big companies to skin a cat e.g. one of our best payers was taken over by a private equity firm and promptly upped the payment terms to 60 days nett. Complaints were met with the comment "either accept the terms or we'll find others companies who will..."
The main issue with this is the fact we are assuming the data will be reliable.
if i was working for a big corporate again, there would be a lot of "gaming" on this.
Eg
1. Dating invoice when keyed in, not suppliers date
2. Not entering invoices at all until just before payment
3. Forcing up "agreed terms" to a blanket high rate, eg standard dates are "within 180 days", but with a side agreement to actually pay within 90.
There simply are no resources to police such data disclosures.
A more useful average would be the amount of time it takes to pay each pound of credit. If there's a policy of paying all small invoices under 30 days and all larger ones after 60 days, the average time to pay an invoice means very little.
I think the true measure is "from date of invoice". A large company I once worked for had under 30 days in its published accounts, any supplier would tell you the true number was over 60.
Let's say the supplier invoiced today, 2 Feb 17. That invoice goes to accounts payable who log it. It gets matched to the purchase order, and sent to the procuring department. The procuring department then needs to issue a service entry number, which requires 2 authorisations.
That process normally takes 2 weeks. Due to cash flow issues people were being encouraged to take 6.
So the service entry number gets issued on 17 March 17. We now have a 3-way match in the system and, if a standard invoice, that will be scheduled for the next main payment run. Main runs are twice per month on 1 and 15.
So on 1 April 17 that invoice gets paid, which is about 60 days. The figure for the annual report is 15 days, from 17 March 17 to 1 April 17.
The replies so far show just how meaningless any set of statistics can be when you can game the data entry.
They need to specify in the regulations the definitions so that fiddling of the figures isn't as easy as the replies show it is.
And they need to define the brackets by size of invoice as well as days to pay.
Perhaps a good start would be to regulate that the date of the supplier's invoice is the date to start counting from..but then the larger firms would just pressurize the small firms to delay invoices until the end of the month or say they only accept invoices dated 1st of the following month.
Well meaning regulations but no way of really enforcing them - large businesses will always find a way of [***] down on the small suppliers to benefit the large one.
The regulations state that time to pay is measured from the date of receipt of the invoice. There is a problem with this. Does anyone know of an accounting system which records the date of receipt? All systems record the Invoice Date and almost all will record the date of input to the system. I have not seen one that also records the date of receipt (unless received electronically directly into the system), which will normally lie between those two dates. Therefore it will be impossible for most companies to strictly comply with these regulations. I expect most companies will either use invoice date or input date as the only practical way of trying to comply. Any amendments to software to add another date to all invoices will be costly and will not be ready for April.