25%: this is the SMEs bankruptcies annual number in France, due to late payment. The rules for payment terms are clear: by default, payment must be made on the 30th day after receipt of goods or performance of the service, which can be extended - if there is an agreement between the two parties to the contract - to 60 days after invoicing. This is the maximum period that can be granted: beyond that, penalties for delay are provided for.
The regulator, through the DGCCRF - the General Directorate of Competition, Consumption and Fraud Control - intends to strengthen the protection of companies to reduce this number, especially in the context of the health crisis. Small businesses, already weakened before, are even more vulnerable since the beginning of the pandemic. A vigilance committee on payment deadlines was set up very early on by the government, calling for solidarity due to rapidly increasing payment incidents.
The regulator is therefore more inflexible than ever on payment terms: controls are more frequent and sanctions are exemplary. It doesn't matter if the company pays most of its suppliers on time, it only takes one invoice out of time to receive a fine. And the bill can quickly be very high: up to 4 million euros!
This intransigence should become the norm in the years to come with the transition to mandatory electronic invoicing from 2023 and the associated e-reporting. Finance departments therefore have a major stake in payment deadlines and must adapt to the changes instigated by the regulator by digitizing all their flows and processes. How to prepare for these regulatory changes? What are the key dates to master in 2021, to better prepare for the future? We give you all the details in this article.
It's been several decades since finance teams started to equip themselves with tools to digitalize their financial flows. However, today's observation is simple: there are still many workload breaks despite the efforts made. Even when well equipped, the company is quickly exposed and in default.
Of course, the "purchase order equals invoice" approach has helped to some extent. However, it has its limits: as soon as there is an exception in the flow, the breaks appear. On average, 20 to 50% of invoices escape the standard process, which easily leads to late payments.
For the regulator, however, it is not the tools, the internal processes or the good faith of the parties involved that matter. What matters is the result, i.e. the actual payment time.
The finance department must therefore be ready to control five key dates in the invoicing process. It is necessary to monitor them as closely as possible and to be able to trace them to demonstrate compliance with the regulator.
These 5 dates allow you to optimize cash management in your company. They are :
To be able to manage them as closely as possible, you need to have an end-to-end view of the billing process. However, this is rarely the case in companies today. Companies have made considerable investments to equip themselves (ERP, invoicing software, etc.). Each tool, taken individually, fulfills its role. On the other hand, there is no global vision of the process, especially for monitoring key dates. It is difficult to know where the invoice is in the cycle and who intervenes at what time and for how long. These breaks in the process expose the company, even when it is well equipped in advance.
Let's illustrate the situation. The supplier issues the invoice, but it takes a few days to send it. There is already a time lag between the date of issue and the date of receipt. Then the invoice goes through validation processes, and rightly so. This often takes a long time and is sometimes still done with a stamp on a piece of paper. Accounting and reconciliation are done in departments far away from the ordering party. Communication between departments is rarely smooth, which again wastes several days. In short, the days add up very quickly and the company is getting dangerously close to the payment deadline.
Many DGCCRF controls result in fines, which proves that there is a real structural problem with payment management, regardless of the sophistication of the tools used in companies. To be efficient and compliant, it is necessary to have an end-to-end vision of the process. How do you do this when the tools you have in place do not meet this need?
Beyond compliance, the ability to manage cash closely has several benefits:
The company pays neither too early nor too late, and therefore optimizes its cash management.
Suppliers offer bonuses for on-time or early payment.
The company's reputation is preserved with its suppliers and the general public.
It is the combination of compliance and performance that ensures the company's success. Today, the challenge for most finance departments is to free up the time spent dealing with compliance issues to deal with performance issues.
How to deal with them, when we know that the current technical processes do not keep all their promises? Completely redesigning the information system is not an option, given the monetary and time investments already made. The solution lies elsewhere: it is the addition of an extra layer to your processes to improve their efficiency, while being compliant.
This is what we do at Stratumn. The technological layer that we add allows us to embrace both encrypted data and contextual data. The process will therefore take into account both the data and its quality. The 20 to 50% of data that was previously unavailable to the tools is reintegrated and can be processed automatically, which improves the performance of the processes and allows them to be monitored from end to end. Stratumn also offers a collaborative tool in essence, so that all departments of the company are aligned in the management of the processes, and which allows to trace the actions of each collaborator, for a better follow-up and a reporting of the conformity of each step.
Stratumn allows to solve the existing load breaks in the cash management processes, without calling into question the tools already in place in the company. Our solution adapts to the regulatory challenges while bringing you a quality of collaboration essential to your processes.