In Focus Commercial Credit


Lessons from the Dark Side


What does credit look like from the perspective of a purchase-ledger department?


John Simpson Finance manager transactional, Heras John.Simpson @crhfsg-uk.com


About a year ago, I volunteered to help manage the purchase-ledger team within my company, following a number of senior staff leaving the business. One of my colleagues on credit control


decided to switch full time onto purchase ledger, I asked her the other day what was the thing she disliked most about the role, and the simple answer was: being chased for money. So I thought it may be useful to look at


the view from purchase ledger. Most people employed in these roles are not deliberately holding back payments, instead they are actively trying to process invoices. Interruptions, in the form of credit control


standard collection tactics, prove to be a distraction from this basic purpose. Whilst not usually deliberate, most


purchase-ledger teams will have an array of anti-collection tactics and this article is a collection of lessons from the Dark Side; no Darth Vadar, no Jedi, I am certainly not Lord Voldemort! I cannot condone these tactics and none


of the below represent any policy of my current employers, but it is worth taking a view from the flip side to better understand what type of collection activity does work.


Statements Firstly statements – which are often viewed by credit controllers as a copy-invoice generator – do serve a purpose within purchase ledger, as they are checked against payment runs. A simple excuse for non-payment is no


statement, no payment and reminders; you can pre-empt this by ensuring that they get sent. Likewise, where possible, invoices should be e-mailed to a central purchase-ledger


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address; the UK postal service seems to have a particular problem at delivering supplier invoices, meaning yet more requests for copies and further delays. A lot of collection activity is focused


around reminder letters, either though the post or e-mails. One of the unfortunate facts of life is that most teams are too busy to dwell on these particularly gentle reminders, or first letters. Whilst they may get a cursory check sometimes, most of the time they end up in the bin.


Order number A quick win for any purchase ledger team is an invoice not displaying an order number or a correct one; a quick rejection notice later and the credit controller is left chasing operations up to get the correct information, usually delaying payment. If given an order number, it is crucial


that it gets onto the invoice. A frustration for purchase ledger is invoices which exceed the stated purchase value, this often stops them from processing, even if a goods receipt notice is actioned, due to the value


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A simple excuse for non-payment is no statement, no payment and reminders; you can pre-empt this by ensuring that they get sent


mismatch. Usually these will be queried internally first, but an efficient operation will issue a rejection or withholding notice. To get round this, it is good practice to


check the order acknowledgement against invoice, but, in high-volume activity, this is not always practical. Basic good practice is to get the order information right to try and combat this delay.


Evidence of contract Where a supplier is unknown, or where there is a question over goods supplied, purchase ledger may be directed by their operations team to obtain evidence of contract to see that they did accept this cost. Similarly, a proof of delivery may also be


requested to check the validity of goods being received, even this could be challenged with no recognised signature or printed name. Unsatisfactory performance of goods or


services can be a reason to hold payment approval by operations. Whilst these requests may be honest, they can be straightforward stalling tactics, and a swift response and challenge is required. Controlling and monitoring requests through an effective query system is a good way of handling this.


Signatories Signatories can be major headache for getting payments approved for purchase ledger. However this can also be a good excuse for holding up payment. Standard excuses include ‘the payment is ready but waiting for a director or second signatory to be in the office’ and can stretch to as extreme as ‘the signatory has died’. Similarly, and unfortunately, we have


suffered with this scenario where there is no-one in purchase ledger due to illness or holidays. This can lead to backlogs which are


December 2017


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