In the typical scenario involving the supplier receiving the invoices, the former is usually given priority to submit invoices to initiate the process of aging. By handling the invoice manually, as per the cases that were discussed previously, the suppliers were under the impression that the thirty or sixty days of payment term will start from the time they turned in the invoice. Besides, the supplier will be willing to pay regularly because the sooner they submit their invoice for aging, the sooner they can receive their payment.
The account payable & procurement team try to avoid any confusion by following the company process. This process assures that they will only be paying for the things delivered to them. For example, in this case, if they receive an incomplete invoice, the standard protocol will be to call the supplier in question and request the delivery of the additional information.
On following the procedure mentioned above, suppliers started to complain about payment delays. They requested corrective actions be implemented, which was their right. The previous method was arduous, causing prolonged wait time for the suppliers to receive their money, who were not aware that their invoices had been delivered in the wrong form for the company. The fault does not lie with the suppliers, who had already given their service and we're now following up on their payment. However, the responsibility does not lie with the client, who has specific rules and regulations to follow to avoid the misplacement of any invoices. The fault lies in human error. To make this whole process more accessible, the client should have rejected the suppliers’ invoice if it didn’t follow the format of submitting the invoice.
An example I have witnessed in the workplace is:
One of the suppliers is responsible for delivering resources to our company. These resources are required to aid our team in delivering customer projects. The group contacted the suppliers directly and requested the delivery of the funds. These resources were provided, forgoing the company process. The company process is as follows:
What happened, in the scenario mentioned above, was as follows:
The situation above created a conflict based on misunderstanding and miscommunication. The team is working on a service, and the supplier is assuming revenue coming monthly, at the same time. However, the company is not aware of the costs running simultaneously on that specific project. Out of the blue, a statement of account was received from the supplier; depicting a large sum, the company must pay for resources our finance department had no evidence for requesting. After some investigation, we discovered that by not following the right processes from both parties, both the client and the supplier, it led to this mishap. The following factors were taken into account:
The suppliers’ cash-flow gets affected:
By having the ISP, we were able to create all the invoice process. This invoice process follows a procedure that is impossible to forgo. The suppliers must first submit all the prerequisites along with their invoices. This helps us prevent any miscommunication by bridging the gap between the suppliers and the client.
ISP was able to aid us in the following:
It also helps our supplier. This is achieved by the following:
The moral of the story is that ISP is mutually beneficial in helping both the supplier and the client with the invoice issue. This helps us avoid any error in the invoices submitted and allows both parties to have transparency regarding the timing and amount of payment.
