The London Borough of Bexley is cracking down on late payments to support local and small businesses and make savings.
The council has overhauled its procurement processes and introduced a payment programme where suppliers provide discounts based on how quickly they are paid.
Under Bexley’s Supplier Incentive Programme (SIP) participating suppliers agree in advance to pay a rebate to the council in exchange for early payment.
Mick Sullivan, head of procurement at the London Borough of Bexley, said: “The quicker we pay them, the higher the rebate. It’s a very small rebate on each individual invoice but that mounts up over the course of the year and many, many suppliers.”
Under SIP, suppliers are paid within an average of seven days, compared to the council’s standard 30 days. The council is on track to make £740,000 of savings over the next five years via the programme.
Bexley has been working with Oxygen Finance, a payment provider, to deliver the programme as part of its electronic invoicing system.
Speaking to SM, Sullivan said key to making SIP work was achieving high compliance with the procurement processes. “It’s not just about paying an invoice quicker, it’s about getting all your ducks in a row all the way through process,” he said.
“You need to get your internal processes in order to make sure that, if you do get companies that want swifter payment, you can actually do it.”
For Bexley this meant having a strong procure to pay (P2P) process backed up by a 'no PO, no pay' policy.
Sullivan said: “In any large organisation you need a proper P2P process that includes having all your payments backed by a purchase order.
“You need that compliance, that governance, backing your processes for this all to work. The minute you’ve got different systems, different processes going on around the organisation, it won’t work.”
Sullivan said the council’s internal processes are now “second to none”, with around 99% of invoices coming with a procurement order.
“Our 'no PO no pay' programme has been a massive success,” he added. “You’d only notice that internally, but obviously the success of that has been important to the success of SIP,” he said.
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