Proof-of-Delivery Process Management And Automation Vital to Improve Businesses’ Cash flow

by Capisol on February 17, 2020 Comments Off on Proof-of-Delivery Process Management And Automation Vital to Improve Businesses’ Cash flow

On average, an accountant spends 25-30% of their time looking for documentation to resolve queries, or resending documents to customers to ensure payment is made. By utilising technology to automate the control and distribution of invoices and linked statements, companies can expect to achieve a 10 to 35% improvement in their monthly cash collections. Over and above this is the 25% of time (a whole week in a month) saved when there is no longer a constant need to search for documentation.

The importance of proof-of-delivery (POD) management is a frequently overlooked or misunderstood aspect of keeping a business running smoothly, and cash flow consistent. Finance departments typically refer to a ‘three-way document match’ process to finalise a transaction in the system. However, this concept is not widely understood by the greater business community.

This is according to Christopher de Zeeuw, Managing Director of Capisol Software, a trusted provider of easy, efficient digitisation solutions and cloud-native, integrated and automated document management.

“Since finance holds the purse strings of any organisation, it is vital that their requirements are met in order for payments to be made. This becomes increasingly relevant in large customers’ or finance departments receiving your documents,” de Zeeuw advises.

“The direct impact of not having your documentation correct is at best a delay in payment being made to you; but it might even result in no payment being made if you cannot complete the document trail,” he points out.

Three-way document match

The documents involved in the three-way match are purchase orders, goods receipts and supplier invoices. If data on all three of these documents is not a 100% match, it will negatively affect payment being made.

“In larger organisations, there are usually various people involved in a transaction flow, as best practice is to have segregation of duties to assist with the prevention of fraud or errors,” de Zeeuw explains.

“The procurement process typically starts with an order being raised in the system, which is subsequently approved by management prior to being sent to suppliers. When businesses embrace the drive to increase their automation and efficiency, approval of the initial order effectively amounts to the approval of payment to be made to a supplier for the order,” he adds.

The process culminates with the finance department, where all three documents (comparing quantity and price) are matched, to ensure that the amount due agrees with what was received and is also consistent with the original purchase order.

Cause of payment delays

The finance department requires a SARS-compliant tax invoice to be able to process and finalise the transaction in their system for payment. De Zeeuw advises that it is not advisable to rely on the goods receiving department to send documentation to the finance department – even if goods have been delivered on an invoice.

“This is especially relevant when the customer has a centralised, shared service that is geographically separate from the operations / warehouse,” he says.

If there is a discrepancy, or no goods receipt processed in the system, the finance department will need to review the signed POD to confirm precisely what was delivered and signed for.

“It is at this point that the first major delay can happen if the signed POD is not available. The finance department can try to obtain the document from the warehouse, but are more likely to ask the supplier to send through a copy of the signed POD. If the supplier is not able to produce the signed document quickly, this will definitely result in a delay in resolving the query, which in turn impacts when payment will be made,” de Zeeuw emphasises.

“The key point is that, without the finance department receiving a tax-complaint invoice and the signed POD, the query cannot be resolved and any delay in producing the invoice or signed POD will directly result in a delay in payment,” he explains.

Eliminating reasons for delayed payments

“Given the importance of having all documentation aligned and available to ensure payment can be made within terms, it is highly recommended that companies ensure they have automation and controls in place to ensure that all invoices and signed POD’s are available, should a query be raised,” he says.

“Automation does not only entail scanning in the signed POD and storing this manually on a drive. In order to achieve value out of the automation, one must ensure that the scanning process is efficient, designed to remove human error and – most importantly – that there are exception reports. These reports must be easy to extract and up-to-date at all times, so that the finance department can identify any missing invoices or PODs,” he points out.

For the ultimate level of automation and best cash flow impact, it is recommended that all invoices are automatically distributed in a SARS-compliant format to one’s customers’ finance departments when the transaction takes place. From the invoice, the finance department must be able to drill down to the signed POD – without having to request a copy of the document.

“This simple step eliminates any reason or excuse for delayed payment, and ensures that the finance department has all the required documents to process the transaction. Furthermore, if there is a query, this can be raised within the same month, a possible credit passed, and the invoice still paid within terms,” he adds.

The final step to eliminate any reason for delayed payment is to send out a statement at month-end, which details all invoices which are due for payment. From the statement, the finance department must be able to link to any open invoice and subsequent POD if they require. This ensures that all documentation is available for the invoices to be processed, and that the full outstanding balance can be settled within terms.

Automation considerations

When selecting the level of automation to be adopted, companies must ensure that their document management partner is trusted in the industry and can provide top-level security. The following guidelines will help companies to gain the most from document automation:

  1. Automate where possible: For example, allow batch scanning and ensure the system automatically splits the documents. Auto-generate the invoices from the system and have these securely archived and distributed in the same step.
  2. Reduce human error: The nature of the delivery process often means that PODs get batched together, making it difficult for the system to read all the information. Ensure that where human intervention is required, this is only done on the exceptions, and that the information required to be inputted is limited and validated.
  3. Have a single Master of Data: document management and automation must integrate with the company’s accounting system, so there is only one source of data to avoid errors or fraud.
  4. Exception reports: these are critical to ensure the system is run by exception only – and ensure that all documents are in the system and delivered.
  5. Link documents: the simple process of linking documents and making these securely available to the finance department without them having to log in to a portal is critical to achieve the return-on-investment.
  6. The system must be user-friendly: It must have the ability to quickly search and find a document and resend in one single step.
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