It’s hard to believe that with all the automation a TEM solution brings to invoice management, clients still incur late payment charges and service disconnection from late or missing payments. Well, it occurs on a frequent basis, and is often the primary pain experienced by our prospects who are frustrated with their TEM services provider.
Fortunately, these are not difficult challenges to overcome. They can be eliminated with a couple tweaks to align processes with best practices. The root causes of late payments and service disconnections link back to two areas:
- Invoice receipt
- Balance forward reconciliations
Invoice Receipt – The Real Cause of Late Payment Charges
Invoice receipt is a part of TEM programs which requires recurring, proactive management to ensure all invoices are received, reviewed, and payed within the monthly accounting cycle. Almost every TEM service agreement will have SLAs related to invoice receipt and timeframes around invoices processed within X days of receipt. However, most late payment charges (LPC) are caused by how the TEM service provider manages late or missing invoices.
When TEM Services Providers Rest on their Laurels
These issues occur when TEM providers allow too much time to pass before following up with vendors on invoices that have not arrived on the expected date. Many TEM service providers allow five to ten days to pass before starting the missing invoice follow-up process, expecting late invoices will arrive within the allowance window. As time passes without proactive follow up, processing / payment cycles are missed, leading to late payments.
The Problem of SLAs with No Teeth
We recommend a best practice of initiating and documenting the carrier communication on the day following the expected date of receipt. Establishing communication with the vendor early in the process will provide sufficient backup to dispute and receive credit for any LPC charges related to those invoices.
This process is rarely addressed in the TEM services contract. Enterprise procurement professionals request strong SLA penalties for TEM vendors in the case of service disruption. Since the real cost of service disruption and clauses limiting liability to fees paid are in most contracts, these SLAs have little teeth.
A Simple Fix for TEM Services Agreements
Fortunately, a simple fix can deal with service disruption in a TEM contract. Define processes in the SOW which include adding a step requiring invoice balance forward reconciliation monthly with a corresponding review with the telecom suppliers. This will work out these erroneous invoice balances and resolve any payment application issues.
The 2-Markets Difference
Of course, here at 2-Markets, we’re not only aware of this common problem, we actively work to prevent it. If your TEM provider is content to rest with inadequate service delivery, contact us and let’s talk about how we can improve your TEM services – without the pain of switching to new TEM software.
Additionally, sign up for our blog. Later this month, I’ll write about the economics of outsourcing invoice payment.
