Weekly Blog by Philip King, CEO of the ICM - 'Second time lucky?'

I had the pleasure of attending the ExPP e-invoicing Summit in Warsaw earlier this week to present on the EU Late Payment Directive that came into force earlier this year. The lack of awareness of the Directive was no surprise, given that only 9 EU member states met the transposition deadline of 16 March this year and – six months on – I understand Belgium and Germany have still not done so.

 

The Directive is intended to drive a change in culture encouraging organisations to pay promptly and to discourage them from looking to demand excessive payment terms. I’ve expressed previously my view that it is unlikely to have the desired effect because the 2000 Directive had little impact and the new one isn’t that different, and because it tends to benefit organisations who take legal action and recover additional sums on top of the original debt. That’s all well and good but it comes after the event and is little comfort to a small business that’s failed due to a cashflow crisis when what it needed was the original invoices settled on time.

 

Fundamentally, small businesses tend not to know about the legislation, those that know about it aren’t sure how to use it, and those that know how to use it are reluctant to do so for fear of upsetting their customer. Nevertheless, as a tool in the armoury against late payment it has its place and it contains some measures that may yet prove to be of real benefit. That’s for another day though.

So what’s the connection between late payment and e-invoicing? I often preach about the need for small businesses to get the basics right, and the basics include invoicing promptly and correctly. One of the benefits of e-invoicing is that the system can instil a level of discipline into the process such that the correct fields are populated, and it is submitted in a format fit for processing. Also, many systems will provide confirmation of receipt and allow the supplier to monitor process through the payment system and have visibility of when funds can be expected.

 

I sometimes hear criticism when a large organisation issues an edict to its supplier base insisting that it adopts a particular system for submission of invoices. It’s accused of arrogance and abusing its power by forcing small suppliers to adopt a system they might prefer not to. Possibly so but, given that inaccurate and late invoicing is one of the biggest obstacles to getting prompt payment, let’s not dismiss the benefits out of hand.

 

Seems to me there are two sides to every argument!