How to pay on time
The payment request is the final link in the process "From Request to Payment".
The payment process is very closely related to purchases, as far as timely payment can maintain good relations with suppliers and it even helps to make the working conditions better. Overdue payments, in contrast, negatively affect both the relations with suppliers and further deliveries.
In addition, payment for the provided goods / services is an obligation that a buyer undertakes.
For example, contracts with suppliers often have the following obligations:
- a payment occurs within 30 (or another number) days after delivery
- a supplier undertakes to provide the necessary documents in the both original and electronic versions
- The prices in the documents must comply with the contract / specification
If this process is separated from the purchase and left under control only of the accounting department, then there is a risk that all the terms of the contract will not be fulfilled and a company will not even know about its losses (prepayment without delivery, inflated prices in documents, electronic documents are not provided and employees spend a lot of time on manual input of information) or about the fact that not all the obligations under the contract are fulfilled.
There is also a number of reasons why it is not necessary to separate purchase, delivery and payment processes, which directly depend on the purchasing department:
- the delivery of goods must be conducted to the full, correspond to an order and has no defects / re-sortings
- a purchase manager is often responsible for paying suppliers and must know when payment is made
- payment for the delivered goods can be one of the leverages on a supplier if the next delivery is not carried out correctly or a supplier refuses to supply the goods at all
- also a purchase manager is sometimes entrusted the responsibility to control the documents from the suppliers and in that case, the delivery can not be paid for until a supplier transfers all the documents.
Therefore, the process of working with purchases often occurs in this way:
1. A purchase coordinator collects approved requests and creates an order.
2. An order is sent to the supplier.
3. A supplier delivers the goods to the warehouse and the person responsible for receiving the goods in the warehouse notes that all goods are delivered (or not all)
4. Documents that a supplier sends, go to the purchase manager
5. A purchase manager has all the data: an order that is carried out under the contract, approval from the director or an approved budget, confirmation on the delivery of goods
6. After all of the above rules are met, a purchase manager can create a payment request and send it to a responsible person (often an accountant or a financial director)
7. A payment request already contains all the information (an order, approval or budget, contract, confirmation of delivery) and can be paid on time
8. Once the payment has been made, the manager can control it
In order for the work to be performed without excel, google doc, paper, you need to select the software with the help of which you can configure the automated interaction of employees.
Typically, this software contains the following functions:
- creating requests / orders
- creating an approval chain
- an automatic notification about the necissity of approval
- linking an order with a contract and supplier's prices
- receipt of goods
- creating payment requests using a 3 factor correlation
- various payment options for suppliers - prepayment / postpaypayment
- payment on demand
- budget constraints
More details about the 3-factor correlation:
As previously stated, in order to be sure that payment is necessary to be conducted, it is necessary to have all the documents: an approved order, which is tied to the contract, a receipt of goods and an invoice from the supplier.
The main idea of the 3-factor correlation is to reduce the discrepancies in documents to a minimum level, i.е. to make so, that what has been ordered, was both delivered and paid.
In fact, this can be done only if a payment request indicates the supplier's document number, there is a reference to an order according to which this request is made, and only those goods that in fact have already been brought by the supplier can be added to a request.
How it works in Precoro:
- first, a contract is created for a supplier and payment conditions are specified (postpay and number of days of payment)
- after an order is created, it passes through the approval process and then it is sent to a supplier
- after a warehouse receives the goods, a person responsible for receiving this notes and creates a document "Receipt of goods". The document "Receipt of goods" contains a reference to an order, a receipt number (this may be a TTN or an expenditure invoice) and a list of received goods
- next, an order indicates what quantity of goods has already been received and what quantity is still awaited to be delivered (or deviation, that is the goods will not be delivered and a client declines them)
- items that have already been received will be available for inclusion to the payment request
- a payment request has a reference to an order in the same way as a receipt of the goods
- if necessary, a payment request may be approved
- after approval, a person responsible for payment will be notified that there is a request to be paid, will follow the reference and will be able to see all the documents related to this request
- also, a purchase manager will always be able to track the list of orders that have not been paid / received at the warehouse yet
For the suppliers that have conditions for working with prepayment, the 3 factor correlation works in a different order:
- after the creation and approval of an order, there should be a payment, and afterwards there is a delivery to the warehouse
In order for the process to happen automatically you just need to establish the payment terms "Prepayment" for a supplier.
If you want to know how many orders, for which you need to create a payment request, are available just look at the order list page. The latest info card indicates that you have 4 orders for which you need to create a payment request.
And in order to be sure that everything you paid for was put in the warehouse, just keep track of the orders numbers that have not been delivered yet.This can be checked on the receipt dashboard.