Smarter Payments e-Report Edition 5
The NHS – Nice Healthy Statistics
Owing to the nature of this large and disparate entity, the NHS was once considered to be the very antithesis of an organisation with a sound financial plan. In fact, with its emphasis lying - as it should do - with the health of the nation, the state of its finances was considered as something churlish to focus on. However times move on, and taxpayers need to know that the money they give is being spent wisely. As a result, 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.
Sound Financial Planning Produces Surplus
Over the last eighteen months, many NHS Trusts 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. In addition, only 3% reported a budget deficit compared to 22% in the previous year – a fantastic result.
William Moyes, Chairman of Monitor, who is responsible for deciding when hospitals are ready for independence, said he had reached the halfway point in the process of changing the NHS from a nationalised industry into a network of self determining organisations. He said:
“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.”
So What are the Challenges?
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 continuing to bubble over in a state of turmoil – the financial departments of any organisation need a firm grip to ride the bumps ahead.
Pinpointing the Problems
Within the larger financial picture rest a number of key areas which should be addressed in order to produce the necessary results. The overriding solution to many of these lies in greater automation. 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.
Duplicate Invoices
The larger and more complex the accounting system is, the more likely it is that there will be duplicate invoices lurking within the system. It is generally agreed that if an organisation is 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 which can be put aside. A solution would be to invest in a bolt on “best of breed” duplicate payment solution which catches any duplicates before the payment run goes out as well as highlighting previous errors within the accounting system. This option is highly recommended as even the most advanced ERP system simply won’t have the degree of speciality required. In addition, taking time to review your master vendor file will dramatically reduce the main reason behind duplicate invoices – having duplicate suppliers. Once again, having an additional `bolt on’ such as duplicate supplier finder technology will act as both a preventative and as a tool for highlighting past errors.
Engage with Suppliers
Getting suppliers on board is crucial to the success of an EIPP project. Because the suppliers used vary dramatically in size and structure, these suppliers will inevitably use differing accounting solutions. These will range from complex financial ERP systems to off-the shelf packages. Some may not even use a finance system at all. That is why time should spent analysing the different solutions on offer so that a solution is guaranteed for everyone and 100% adoption across your trading network.
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 existing systems to enable A/P departments 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.
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.
Inevitably the coming year will involve many challenging decisions from those in control, especially as many Trusts move away from the top down approach of the past. However, by the end of the decade and with adequate systems in place, most of these fledgling independent Trusts will be in a position of strength.
* Audit Commission and the National Audit Office
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