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Covid-19 crisis calls for an agile approach for Accounts Payable

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Covid-19 crisis calls for an agile approach for Accounts Payable

By Ilija Ugrinic, commercial director at Proactis

The Covid-19 crisis has caused ripple effects across all organisational operations – and Accounts Payable (AP) is no different. The global pandemic has seen offices shut down and swathes of the population adapt to a new world of working from home full time.

This change has proved particularly challenging for finance functions, which are used to having access to documents and handling processes both physically and electronically.

One major challenge is the ability to process invoices effectively and efficiently, which is a particularly alarming thought given that right now, the supply-chain is an even more critical factor for safeguarding the financial stability organisations.

With AP teams now working remotely, it is unearthing issues that are leading some to call for the end of paper invoicing altogether, in favour of a complete adoption of electronic invoicing. This is being driven by the sudden realisation by buyers that nobody is on-hand to deal with paper invoices reaching offices, exposing a lack of agility in the process. To put it in to context, of the six million invoices processed through Proactis’ technology each year, 30 per cent of those are paper invoices.

Ilija Ugrinic

Ilija Ugrinic

Electronic invoicing (or e-invoicing) is a broadly used term and can mean different things to different people. One could argue that any invoice submitted via an electronic channel is an ‘e-invoice’, including scanned invoices sent by email as PDF images. However, in this instance, that would rely on OCR or manual extraction. A truly electronic invoice is structured invoice data issued in XML format, created using PO flip or directly entered via a portal, meaning the requirement for manual verification and checking is eliminated. And that leads to a second challenge. Although better than paper for remote working, a switch to PDF invoices, be it data layered or just an image, does not solve the problem facing the AP team today. Not least when around 70 per cent of the invoices processed by Proactis each year are in PDF format.

Many who are at home trying to manually process PDF invoices which are received via email, are dealing with two core issues. First, streamlining the process of which a team member handles each invoice and detaches the PDF from the email, storing it centrally ready for processing. Second is not having multiple screens to work on and needing to continually move between a PDF and the finance system, or another system such as important timesheet information from HR, in order to key in and check the data. This not only slows the process down but increases the likelihood of human error.

There are the obvious reasons for going paperless. For many it is simply the right thing to do. Admittedly, it is tempting to try and turn to pure e-invoicing, whether it is XML or portal invoices. It by-passes manual validation and data checking and has the evident benefit of saving on paper, being more socially responsible and beneficial to the environment. But is it realistic to suddenly expect all suppliers with shortages in the necessary skills, capacity, and budget to want, or be able, to switch in both the short and long term? Also, the supplier has the challenge of then changing a common process they have in place for sending invoices to all of their customers, to then going to a specific portal for one customer – which seems unfair especially in these times.

The question invites debate on the issue, because many do not think it is realistic to assume that paper and PDF invoices will disappear in the short to medium term. Experience shows us that some smaller suppliers simply don’t all have the skill or time to produce an XML or portal invoice and still rely on paper or a PDF – and they tend to spend most of their energy on delivering their core goods and services.

This means the argument for 100 per cent e-invoicing deteriorates under closer scrutiny.  Paperless invoicing should be encouraged where possible, and it might be the answer for us all one day, but that time is certainly not now. The lockdown may well have forced many businesses to recognise inadequacies in their own AP systems, but these will need to be addressed once life according to the new norm has settled down. Right now, their focus is not on adopting a new processing system but on ensuring they have the capacity, technology and resources to safely navigate their way through the unfamiliar method of working that Covid 19 has thrust upon them.

Perhaps the goal should not be to make all invoicing electronic from its source, but rather make all invoices, regardless of source, into one efficient and accurate file of invoices that they buyers’ system can process and pay.

It does not mean that finance departments need to immediately replace everything they do – the last thing smaller businesses need right now is to feel pressured in to implementing electronic processes at a time when their energy and focus is needed on its core business. Instead, if the objective is to pay suppliers on time or early, capture solutions that enable paper and PDF invoices to be processed with the upmost efficiency should be adopted.

We have already seen an agile approach already reap tangible rewards for several companies. Screwfix, for example, now save over £100,000 annually, P&O Ferrymasters has reduced invoice processing costs by over 35 per cent, while Bauer Media reduced AP costs by 66 per cent.

In 1988, the UK postal workers strike proved to be pivotal in the way procurement and finance teams operated. With paper requisitions grinding to a halt, a new way of operating was born as the age of the fax machine began. Over thirty years on, the UK (and indeed the entire world) is faced with a new challenge. It might be different in nature, but once again it is accelerating the quick adoption of a new approach and with it, the full ignition of remote working.

If organisations can help willing suppliers make the transition to e-invoicing, then it is a great goal to have. But Covid-19 hasn’t exposed the need to end paper invoicing, rather the need for an agile and flexible model – one which can efficiently handle paper, data-layer and image-based pdfs, XML and portal invoices, regardless of how the team is set up. Suppliers large and small alike can then focus on delivering the best – and most efficient – service they can.

Finance

Sunak warns of bill to be paid to tackle Britain’s ‘exposed’ finances – FT

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Sunak warns of bill to be paid to tackle Britain's 'exposed' finances - FT 1

(Reuters) – British finance minister Rishi Sunak will use the budget next week to level with the public over the “enormous strains” in the country’s finances, warning that a bill will have to be paid after further coronavirus support, according to an interview with the Financial Times.

Sunak told the newspaper there was an immediate need to spend more to protect jobs as the UK emerged from COVID-19, but warned that Britain’s finances were now “exposed.”

UK exposure to a rise of one percentage point across all interest rates was 25 billion pounds ($34.83 billion) a year to the government’s cost of servicing its debt, Sunak told FT.

“That (is) why I talk about leveling with people about the public finances (challenges) and our plans to address them,” he said.

The government has already spent more than 280 billion pounds in coronavirus relief and tax cuts this year, and his March 3 budget will likely include a new round of spending to prop up the economy during what he hopes will be the last phase of lockdown.

He is also expected to announce a new mortgage scheme targeted at people with small deposits, the UK’s Treasury announced late on Friday.

Additionally, the government will also announce a new 100 million pound task force to crack-down on COVID-19 fraudsters exploiting government support schemes, it said.

(Reporting by Bhargav Acharya in Bengaluru; Editing by Leslie Adler and Cynthia Osterman)

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G20 promises no let-up in stimulus, sees tax deal by summer

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G20 promises no let-up in stimulus, sees tax deal by summer 2

By Gavin Jones and Jan Strupczewski

ROME/BRUSSELS (Reuters) – The world’s financial leaders agreed on Friday to maintain expansionary policies to help economies survive the effects of COVID-19, and committed to a more multilateral approach to the twin coronavirus and economic crises.

The Italian presidency of the G20 group of the world’s top economies said the gathering of finance chiefs had pledged to work more closely to accelerate a still fragile and uneven recovery.

“We agreed that any premature withdrawal of fiscal and monetary support should be avoided,” Daniele Franco, Italy’s finance minister, told a news conference after the videolinked meeting held by the G20 finance ministers and central bankers.

The United States is readying $1.9 trillion in fiscal stimulus and the European Union has already put together more than 3 trillion euros ($3.63 trillion) to keep its economies through lockdowns.

But despite the large sums, problems with the global rollout of vaccines and the emergence of new coronavirus variants mean the future path of the recovery remains uncertain.

The G20 is “committed to scaling up international coordination to tackle current global challenges by adopting a stronger multilateral approach and focusing on a set of core priorities,” the Italian presidency said in a statement.

The meeting was the first since Joe Biden – who pledged to rebuild U.S. cooperation in international bodies – U.S. president, and significant progress appeared to have been made on the thorny issue of taxation of multinational companies, particularly web giants like Google, Amazon and Facebook.

U.S. Treasury Secretary Janet Yellen told the G20 Washington had dropped the Trump administration’s proposal to let some companies opt out of new global digital tax rules, raising hopes for an agreement by summer.

“GIANT STEP FORWARD”

The move was hailed as a major breakthrough by Germany’s Finance Minister Olaf Scholz and his French counterpart Bruno Le Maire.

Scholz said Yellen told the G20 officials that Washington also planned to reform U.S. minimum tax regulations in line with an OECD proposal for a global effective minimum tax.

“This is a giant step forward,” Scholz said.

Italy’s Franco said the new U.S. stance should pave the way to an overarching deal on taxation of multinationals at a G20 meeting of finance chiefs in Venice in July.

The G20 also discussed how to help the world’s poorest countries, whose economies are being disproportionately hit by the crisis.

On this front there was broad support for boosting the capital of the International Monetary Fund to help it provide more loans, but no concrete numbers were proposed.

To give itself more firepower, the Fund proposed last year to increase its war chest by $500 billion in the IMF’s own currency called the Special Drawing Rights (SDR), but the idea was blocked by Trump.

“There was no discussion on specific amounts of SDRs,” Franco said, adding that the issue would be looked at again on the basis of a proposal prepared by the IMF for April.

While the IMF sees the U.S. economy returning to pre-crisis levels at the end of this year, it may take Europe until the middle of 2022 to reach that point.

The recovery is fragile elsewhere too. Factory activity in China grew at the slowest pace in five months in January, and in Japan fourth quarter growth slowed from the previous quarter.

Some countries had expressed hopes the G20 may extend a suspension of debt servicing costs for the poorest countries beyond June, but no decision was taken.

The issue will be discussed at the next meeting, Franco said.

(Additional reporting by Andrea Shalal in Washington Michael Nienaber in Berlin and Crispian Balmer in Rome; editing by John Stonestreet)

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Bank of England’s Haldane says inflation “tiger” is prowling

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Bank of England's Haldane says inflation "tiger" is prowling 3

By Andy Bruce and David Milliken

LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, potentially requiring the BoE to take action.

In a clear break from other members of the Monetary Policy Committee (MPC) who are more relaxed about the outlook for consumer prices, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.

“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online. “But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”

Haldane’s comments prompted British government bond prices to fall to their lowest level in almost a year and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation or BoE rates.

“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.

He pointed to the BoE’s latest estimate of slack in Britain’s economy, which was much smaller and likely to be less persistent than after the 2008 financial crisis, leaving less room for the economy to grow before generating price pressures.

Haldane also cited a glut of savings built by businesses and households during the pandemic that could be unleashed in the form of higher spending, as well as the government’s extensive fiscal response to the pandemic and other factors.

Disinflationary forces could return if risks from COVID-19 or other sources proved more persistent than expected, he said.

But in Haldane’s judgement, inflation risked overshooting the BoE’s 2% target for a sustained period – in contrast to its official forecasts published early this month that showed only a very small overshoot in 2022 and early 2023.

Haldane’s comments put him at the most hawkish end among the nine members of the MPC.

Deputy Governor Dave Ramsden on Friday said risks to UK inflation were broadly balanced.

“I see inflation expectations – whatever measure you look at – well anchored,” Ramsden said following a speech given online, echoing comments from fellow deputy governor Ben Broadbent on Wednesday.

(Editing by Larry King and John Stonestreet)

 

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