Rebecca Sperti is customer relationship director at Causeway Technologies
Prompt payment is the cashflow lifeline that keeps many businesses afloat in the construction supply chain. But our analysis of more than 8 million invoices sent to the top 100 construction firms in the UK has revealed that about 10 per cent are routinely being rejected. With 40 million invoices sent out every year, the impact is huge.
The process of receiving, reviewing, and either approving an invoice for payment or rejecting it back to the supplier for amendment can take weeks, so it is not surprising that supply-chain relationships suffer.
“It’s time to change the narrative and think about prompt payment as a whole industry ‘problem’, and work together to solve it”
Suppliers lose sleep wondering where their invoices are in the lengthy approval process and when they’ll get paid. Contractors become frustrated with wasting resources reviewing and rejecting invoices that don’t contain enough information for them to be processed.
This culminates in serious payment delays, which hinder the financial recovery of construction product and service suppliers across the sector.
There is a lot of focus on what a main contractor can do to pay their suppliers on time, but the supply chain has a fundamental part to play. If they are provided with insight on what a ‘good’ invoice looks like, they can make sure they are doing everything to avoid an invoice being rejected and, ultimately, guarantee being paid without delay.
Five tips for suppliers
So, it’s time to change the narrative and think about prompt payment as a whole industry ‘problem’, and work together to solve it. To get started, here are the top five actions that suppliers should take when submitting an invoice:
- Include a purchase order number. It sounds simple, but this is the number one reason why invoices are rejected. The supplier should make sure they have included the valid and open purchase order number that they received from their customer on their invoice.
- Don’t exceed the purchase order value. It’s important to ensure the value on the invoice being submitted doesn’t exceed the value on the purchase order provided by the customer. If it does, it’s best for the supplier to reach out for an updated purchase order with an increased value before submitting the invoice.
- Check the maths. The total value or total tax submitted in the invoice should match the line items on the invoice.
- Use the right customer name. The company name on the supplier’s invoice needs to accurately reflect the customer they did work for. This is especially important if they are working for a large contractor with different contracting divisions. If in doubt, check the purchase order.
- Use the right product code. The supplier should ensure the product code on the invoice matches the product code held in a catalogue, where appropriate. Again, aim to match the information outlined in the purchase order.
If we work together to improve invoice submission, as well as the approval process, and work towards a ‘right first time’ approach, we can continue to strengthen supply-chain relationships from both directions. Notably, it is one of the simplest and fastest ways that the construction industry can support the financial strength and improvement of the supply chain in 2022.
E-invoicing with fully-automated processes through solutions such as Causeway Tradex can offer support to the construction industry, working closely with both sides of the payments process to ensure speed, accuracy and operational efficiencies.