Author: Pete Loughlin

For years the growth in the use of electronic invoicing was hampered by a very simple fact. There was nothing in it for suppliers. Think about it. A supplier wants to be paid and needs to send an invoice. Whether that’s a paper invoice in an envelope with a stamp on it or an email makes very little difference. The cost of a stamp has got nothing to do with it – unless a supplier is sending many very low value invoices, the postage cost is trivial. While only a few customers demand electronic invoicing, while the business world was largely paper based and while suppliers were being asked to subsidize the cost of their customers' e-invoicing programs by paying for the privilege of sending an invoice, there was always going to resistance. But the world has now changed and the business case for e-invoicing is now fundamentally different to the one-sided calculation with all the benefits loaded on the customer side that would have been built perhaps 5 years ago.

The purchase to pay police aren’t naturally an attractive bunch of people. Like auditors, they only bring ugly messages about compliance and process. And they don’t make their lives easier by tarnishing further their image by moaning about their lot. So how do you get the perfectly rational P2P messages across effectively? How do you prevent it from being perceived as a pointless dictat from an area of the business too remote to understand commercial realities?

A few weeks ago, somebody asked me why supply chain finance had suddenly burst into life - especially in the UK - with a new breed of SCF providers appearing at the same time?. Why is it that in the space of a few months the market place seemed to blossom? Tungsten bought OB10 to create a new SCF proposition. Crossflow Payments emerged in the summer and there were others. Why the sudden explosion? There was nothing sudden about it. These operations have years of planning and preparation behind them. It appears sudden – but it’s not. And we’re about to see something similar happen in Europe around e-invoicing.

There's a particular moral standard that simply doesn't stack up in my view. It's the standard that claims that if it's legal, it's OK. If it's within the rules, it's fair. We see it all the time. Employees who feel they are unfairly treated are told "If you don't like it, you know were the door is". Put up or shut up! The employer knows that the employee needs the job and if they do walk, there's plenty of potential replacements. Whether or not the employee is right in their complaint, the employer is using or even abusing their power over their staff. It's not fair. Large corporations spend huge sums of money employing the best legal minds in the world to show how they can arrange their affairs so that they avoid paying tax. Perfectly legal practices that are quite blatantly unfair - unfair to those tax payers who, whether out of a sense of decency or simply because they can't afford the best legal minds in the world, pay their fair share of tax. I'm not referring to the grey areas - there are lots of them - situations that are open to interpretation and opinion. No, I'm referring to those cases where any reasonable person would agree that a course of action is clearly, without ambiguity, contrary to the spirit and intention of a set of rules, a contract or an agreement. The fact that there is no breach of rules does not make the situation fair - it simply makes it legal. Which is why I'm astonished at the response from Philip King recently on the OB10 blog to a question about prompt payment.

It’s astonishing! At a time when we have Sarbanes Oxley and a culture of control, in the climate of transparency and scrutiny and a fetishistic focus on finance – how is it that fraudsters have been able to get away with a more than 50% increase in procurement related theft? But it’s not that astonishing really. A cursory glance at the procurement practices and purchase to pay processes in any organization will reveal opportunities to defraud and while we should never forget that it is the fraudster that’s to blame, the responsibility is shared with the executives who choose to turn a blind eye and underinvest in proper P2P.

A couple of weeks ago, I sat down with Tony Duggan, CEO of Crossflow Payments, an organisation looking at alternative ways to bring together suppliers and corporate buyers and strengthen supply chains. Supply Chain Finance is a bit of a buzzword at the moment. The old guard, the banks who seem to have tunnel vision for the very big trade finance deals, and the factors who exploit to a greater or lesser extent the vulnerabilities of small and medium sized businesses view the new SCF players with a mixture of  doubt, suspicion and (although they’d not admit it) – fear. And they’re right to. Some of the new models emerging are innovative and impressive and they promise to take business away from the traditionalists. Crossflow is going to do just that in my view. Inspired by hands on experience in industry, Crossflow Payments has taken the concept of ‘Just In Time’ manufacturing and applied it to the financial supply chain. Tony believes that this can help transform the way financial supply chains operate.

The BBC reports today the the Prompt Payment Code - a UK government backed initiative to encourage big business to pay on time - isn't working. In other news, the sun came up this morning and it is expected to get dark sometime tonight. The Prompt Payment Code provides little more than gentle encouragement to business to demonstrate - in words at least - that they will pay according to terms. I wouldn't criticize for one moment those businesses that have signed up to it. I know that they are sincere in their intentions. But the code doesn't have teeth. It doesn't name and shame transgressors. It doesn't hold business to account if they pay little attention to actually delivering against the promise. And it's hardly surprising therefore that it's not working.