Accounts Payable News^®

Clear and Effective Financial Management becomes Critical

Once considered a metaphor for complicated and cumbersome financial management, the NHS is fast becoming a streamlined operation with a clear focus on delivering quality service within budget.  As the regulator of foundation trusts has announced that he expects all NHS hospitals in England to become independent from Government control within three years – it’s more important than ever for each Trust to be able to demonstrate clear and effective financial management.

Targets surpassed for 2008

This fact hasn’t gone unnoticed, and many NHS hospitals over the last eighteen months have looked at new ways to address the issue - implementing new procedures and investing in new automated technology. In fact for 2007-2008 the NHS recorded a surplus of £1.67bn* reflecting a good use of resources, rather than a failure to adequately distribute funds.  Incredibly only 3% reported a budget deficit compared to 22% in the previous year.  Tim Burr, head of the National Audit Office said:

“Good financial management is not just about achieving a surplus.  It is also about meeting delivery targets within the resources available.  The surplus was generated through good financial management.”

William Moyes, Chairman of Monitor, who is responsible for deciding when hospitals are ready for independence, said he had reached halfway point in the process of changing the NHS from a nationalized industry into a network of self determining organisations.  From 1st January 2009, the health service will reach a tipping point at which time Ministers will no longer to be able to legitimately instruct the vast majority of hospitals on how they conduct their business – it will be up to each Trust to decide.

Challenges Ahead

Moving forward, The Department of Health and the NHS will face a number of challenges in the year ahead including changes to the financial strategy for the NHS, changes to the financial reporting framework and further system reforms.  However, judging from the performance of the overwhelming majority of the Trusts over the last year – many are well placed to cope.  The focus now will be on maintaining the commitment to financial clarity and efficiency already achieved and on looking at ways in which to further advance these.  With the global economy seemingly bent on a downward spiral, filled with stories of shocking proportions – a period of belt tightening and firm financial management is essential.

So which areas should you look at?
Many NHS Trusts experience problems in exchanging financial documents such as purchase orders and invoices with suppliers. Automating the Accounts Payable (AP) function by introducing an Electronic Invoicing Presentment and Payment (EIPP) solution can eradicate many of these problems by eliminating paper, reducing manual input and speeding up slow processes.

Electronic Purchase Orders
Taking the entire procure-to-pay process online is the only way to make significant savings with EIPP. The manual task of sending out thousands of paper purchase orders to suppliers nationwide is costly and time consuming for accounts departments. Many EIPP solutions plug into your existing system to enable you to present purchase orders to suppliers online. From the online purchase order, suppliers can download the data directly into their systems and create an invoice. This speeds up the invoicing process by eliminating manual data entry and reducing errors.

Eradicate Duplicate Invoices
The larger and more complex the accounting system is, the more likely it is that you will have duplicate invoices lurking within your system.  It is generally agreed that if you are processing in excess of 1,000 invoices a month at least one will be a duplicate.  With the emphasis on financial controls and efficiency, this is no longer something to be pushed to one side.  A solution would be to invest in a bolt on “best of breed” duplicate payment solution, as even the most advanced ERP system simply won’t have the degree of speciality required.

Increase Working Capital Cycle
Most NHS Trusts carry out frequent transactions with suppliers, often on a daily basis. This can lead to cash-flow problems due to the amount of time it takes to process paper invoices. Presenting purchase orders to suppliers online and receiving invoices electronically will dramatically increase the working capital cycle. Queries and disputes can also be handled electronically, thus speeding up the approval
process dramatically. By automating the delivery and management of supplier invoices you can process frequent and high volumes more efficiently and cost effectively.

Get Suppliers on Board
Getting suppliers on board is crucial to the success of your EIPP project and because the suppliers you use vary dramatically in size and structure, inevitably these suppliers will use differing accounting solutions. These will range from complex financial ERP systems to off-the shelf packages. Some may even not use a finance system at all. That is why you need to spend time analysing the different solutions on offer so that you are guaranteed a solution for everyone and 100% adoption across your trading network.

Complex Invoice Processing
It is generally believed that the more complex the invoicing process, the greater the benefits are with an EIPP solution. Some NHS suppliers have complex invoicing processes that often lead to mistakes, a longer dispute process and delayed payments. Some systems can help streamline complex invoices by automating and simplifying processes. For example, the Accountis EIPP system allows suppliers to attach supporting documentation to invoices, such as timesheets.

The year ahead will present a challenge to the NHS in its move away from the top down Government approach of the past and towards a self determining future.  However, with adequate systems in place, and a large helping of self confidence and belief – most will be in a position to see out the decade with a feeling of hope for the future and pride in what’s been achieved.

* Audit Commission and the National Audit Office